Gabriel E. Lade

Policy Shocks and Market-Based Regulations: Evidence from the Renewable Fuel Standard

&NA; The Renewable Fuel Standard mandates large increases in U.S. biofuel consumption and is implemented using tradable compliance credits known as RINs. In early 2013, RIN prices soared, causing the regulator to propose reducing future mandates. We estimate empirically the effect of three “policy shocks” that reduced the expected mandates in 2013. We find that the largest of these shocks decreased the value of the fuel industrys 2013 compliance obligation by

Costs of Inefficient Regulation: Evidence from the Bakken

7 billion. We then study the effects of the shocks on commodity markets and the market value of publicly‐traded biofuel firms. Results show that the burden of the mandate reductions fell primarily on advanced biofuel firms and commodity markets of the marginal compliance biofuel. We argue that the policy shocks reduced the incentive to invest in the technologies required to meet the future objectives of the RFS, and discuss alternative policy designs to address the problems that arose in 2013.

Ex Post Costs and Renewable Identification Number (RIN) Prices Under the Renewable Fuel Standard

Efficient pollution regulation equalizes marginal abatement costs across sources. Here we study a new flaring regulation in North Dakotas oil and gas industry and document its efficiency. Exploiting detailed well-level data, we find that the regulation reduced flaring 4 to 7 percentage points and accounts for up to half of the observed flaring reductions since 2015. We construct firm-level marginal flaring abatement cost curves and find that the observed flaring reductions could have been achieved at 20% lower cost by imposing a tax on flared gas equal to current public lands royalty rates instead of using firm-specific flaring requirements.

Air pollution and visitation at U.S. national parks

We critically review the Environmental Protection Agency’s (EPA) assessment of the costs and benefits of the Renewable Fuel Standard (RFS2) as summarized in its regulatory impact analysis (RIA). We focus particularly on EPA’s methods used to calculate the costs of the policy on the US fuel market. We compare EPA’s ex ante cost and benefit estimates to measures of ex post costs implied by the price of compliance credits under the policy. Overall, we find that the agency’s assessment was inadequate. In spite of, or perhaps because of, the detailed and complex analysis underlying the RIA, EPA overlooked several fundamental factors. We conclude by recommending a simplification of the analysis used in RIAs, as well as the use of “stress tests” in RIAs to ensure that programs like the RFS2 are designed in ways that can manage high compliance cost scenarios.

Designing Climate Policy: Lessons from the Renewable Fuel Standard and the Blend Wall

Ozone levels in U.S. national parks are similar to those of U.S. cities, and are negatively associated with visitation. Hundreds of millions of visitors travel to U.S. national parks every year to visit America’s iconic landscapes. Concerns about air quality in these areas have led to strict, yet controversial pollution control policies. We document pollution trends in U.S. national parks and estimate the relationship between pollution and park visitation. From 1990 to 2014, average ozone concentrations in national parks were statistically indistinguishable from the 20 largest U.S. metropolitan areas. Further, relative to U.S. cities, national parks have seen only modest reductions in days with ozone concentrations exceeding levels deemed unhealthy by the U.S. Environmental Protection Agency. We find a robust, negative relationship between in-park ozone concentrations and park visitation. Still, 35% of all national park visits occur when ozone levels are elevated.

A review of low carbon fuel policies: Principles, program status and future directions

Many policies mandate renewable energy production to combat global climate change. These policies often differ significantly from first-best policy prescriptions. Among the largest renewable energy mandates enacted to date is the Renewable Fuel Standard (RFS), which mandates biofuel consumption far beyond what is feasible with current technology and infrastructure. We critically review the methods used by the Environmental Protection Agency to project near- and long-term compliance costs under the RFS, and draw lessons from the RFS experience to date that would improve the program’s efficiency. The lessons are meant to inform both future RFS rulemaking and the design of future climate policies. We draw two lessons specific to the RFS. First, incorporate uncertainty into rulemaking; second, implement multi-year rules. Multi-year rulemaking allows for longer periods between major regulatory decisions and sends greater certainty to markets. We also provide two more general recommendations: tie waiver authority to compliance costs or include cost containment provisions, and fund research and development of new technologies directly rather than mandating them. Future technological advancement is uncertain, and mandating new technologies has proven to be largely ineffective to date, particularly in fuel markets.