On the Issues: Increasing Electricity Prices, Imprecise Policymaking, and More

Matt Fleck, Meisi Li, and Elizabeth Wason

Twice a month, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Keep reading, and feel free to send us your feedback.

Here are some questions we’re asking and addressing with our research chops this week:

How do consumers respond to increases in the price of electricity in the short and long term?

The price of electricity in California has surged in recent years, as utilities invest in upgrades to the electric grid that reduce the risk of wildfire and replace aging infrastructure. Growth in demand for electricity, along with consumer incentives for rooftop solar, which have shifted some costs to utilities and onto households that don’t have rooftop solar, also have contributed to increasing electricity rates. This increasing price of electricity has prompted some Californians to change their behavior; for example, by limiting their use of air-conditioning. But changes in residential electricity demand likely will be larger in the long term, says Jesse Buchsbaum, a fellow at Resources for the Future (RFF). Buchsbaum joined a recent episode of the Resources Radio podcast to discuss research about the responses of consumers to differences in the price of electricity. “[C]onsumers seem to be about 16 times more responsive [to differences in electricity prices] in the long run than they are in the short run,” says Buchsbaum.

How successfully are place-based economic policies targeting the communities most in need of the funding?

In 2023, almost 50,000 clean energy projects in low-income communities or on Tribal lands were awarded tax credits from the Low-Income Communities Bonus Credit Program, according to data released this fall. The program, which is funded through the Inflation Reduction Act, is one example of a place-based economic policy intended to support communities that have experienced economic hardship for reasons linked to geography. But recent place-based economic policies, including the Low-Income Communities Bonus Credit Program, may not be targeting the communities that need help the most, say RFF scholars Daniel Raimi, Alexandra Thompson, and Zachary Whitlock. In an article from the latest issue of Resources magazine, these scholars evaluate four federal place-based policies that collectively cover 64 percent of the US population. “Because resources are limited, making so much of the nation eligible for these programs means that the benefits of the policies will be spread a mile wide and an inch deep,” they say.

How—and how often—does inadequate wastewater infrastructure put communities at risk?

The damage caused by recent hurricanes continues to affect public health. Many North Carolinians still are waiting for access to functioning wastewater systems after Hurricane Helene. In Florida, a stormwater pipe that failed just before Hurricane Milton made landfall caused significant releases of wastewater and prompted local officials to invest in improvements to wastewater infrastructure. Extreme weather events such as hurricanes can exacerbate inequities in access to centralized wastewater services. On the latest episode of Resources Radio, Maura Allaire, an assistant professor at Arizona State University, discusses issues related to these inequities—in particular, septic system failure—in the United States. “The reality in the United States is that septic systems fail at alarming rates because of a lack of upkeep or challenging soil conditions and weather,” says Allaire. “This is concerning, since the issue might grow in the future with aging systems, more intense precipitation, and sea level rise.”

Expert Perspectives

In Focus: Partisan Views on Climate Change

While climate policy often polarizes members of Congress, American voters—Democrats, Independents, and Republicans—generally support climate policy. In a new In Focus video, Stanford University Professor and RFF University Fellow Jon Krosnick discusses findings from polling that examines areas of partisan agreement and disagreement on climate science and policy. These polling data make up the third report in the Climate Insights 2024 series. Since 1997, Krosnick, his Stanford colleagues, and other RFF researchers have tracked views held by Americans about climate change as part of the Climate Insights survey project. Find out how these views have changed over time.

Resources Roundup

Advancing Environmental Justice Through Federal Regulatory Guidance

As the Biden administration continues to prioritize environmental justice, regulatory guidance aims to ensure that federal initiatives benefit disadvantaged communities. This Monday, October 28, RFF will host a webinar featuring discussions with RFF scholars and environmental justice specialists, including staff at the US Environmental Protection Agency, about opportunities to advance environmental justice in underserved communities through regulatory guidance. RSVP to join the virtual discussion.

White House Roundtable on Benefit-Cost Analysis Highlights Challenges and Opportunities

Last week, a subcommittee of the White House Office of Science and Technology Policy presented a new report about the modernization of benefit-cost analysis. The subcommittee hosted a discussion with experts on benefit-cost analysis to highlight progress in the field and future opportunities for improvement. RFF President and CEO Billy Pizer and University Fellow Amy Ando took part in the discussion. “A key question that researchers need to think about is how to triage and prioritize what to study,” said Pizer. Check out the full discussion.

Navigating Carbon Dioxide Removal in California

Carbon dioxide removal (CDR) involves processes that capture and store carbon dioxide from the atmosphere in reservoirs such as forests, soils, oceans, and underground storage. To meet the goal in the Paris Agreement of limiting global warming to below 2°C, CDR must complement efforts to reduce greenhouse gas emissions. However, few countries have established goals for CDR, and policy efforts to finance and scale up CDR remain underdeveloped. In a new study, RFF scholars explore the design and policy challenges of developing a CDR program in California, offering insights on scaling CDR technologies while ensuring environmental justice. “Policymakers must ensure that reliable CDR gets built and used, with technologies that are reasonably ready for commercial-scale application; that investments are cost-effective; and that equity and fairness issues are addressed with attention to community effects, community participation, environmental protection, and environmental justice,” say the authors.

Exploring the Effects on Air Quality of Various Designs for a Cap-Trade-and-Invest System in New York State

The design of environmental policies can shape the distribution of air quality in a given area and help ensure that health benefits are equitably distributed across communities, particularly those that have historically faced higher levels of pollution. In a new issue brief, RFF scholars Alan Krupnick, Wesley Look, and Molly Robertson partner with experts from the New York City Environmental Justice Alliance to analyze the effects on air quality of various designs of a cap-trade-and-invest system in New York State. The researchers conclude that a policy design involving obligations for the electricity sector and restricted trading significantly improves air quality in New York State, especially for disadvantaged communities. “As policymakers consider the design of cap-trade-and-invest, it is important to evaluate how even small changes in program design may impact the distribution of emissions and, ultimately, community air quality,” say the authors.

Balancing Efficiency and Equity in Water Rates

Municipal water pricing affects both resource management and social equity, as water utilities strive to set rates that cover costs, encourage conservation, and minimize the financial burden on low-income households. In a new study, RFF University Fellow Casey Wichman explores how water utilities often set rates that lead to the inefficient use of water and budget shortfalls and suggests that fairer pricing could improve both efficiency and affordability. “Using rate structure and municipal finance data for more than 700 utilities, I show that prices are discounted severely for low levels of consumption within nonlinear rate structures, leading to suboptimal usage and budget deficits, particularly in poorer and smaller communities,” Wichman says.

#ChartOfTheWeek

Data: US Department of the Treasury. Chart: New York Times.

Americans increasingly are taking advantage of clean energy tax credits under the Inflation Reduction Act, with over $8 billion of credits claimed on federal tax returns in 2023, according to data from the US Department of the Treasury. This Chart of the Week illustrates the most popular uses for these tax credits in 2023. Solar panels were the most popular choice—more than 750,000 US tax returns claimed this credit—followed by home improvements such as insulation, air sealing, and efficient windows, all of which help to reduce energy consumption by improving home energy efficiency.

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