Lucas W. Davis, assistant professor at the University of California, Berkeley’s Haas School of Business, and co-author Erich Muehlegger, assistant professor of public policy. John F. Kennedy School of Government, Harvard University, began their research when they became interested in the design of carbon policy, a federal plan to tax utilities for carbon emissions.
“Eighty percent of greenhouse gas emissions come from the production and consumption of energy,” says Davis, “How utilities price energy is important when thinking of a carbon tax policy.”
In their paper, “Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing,” the researchers studied natural gas prices over the past 20 years and found that consumers not only pay the marginal or actual cost of producing the gas, but an additional 40% to cover the utility’s overhead costs such as maintaining its distribution grid or infrastructure.
Under these conditions, the utilities’ biggest consumers of natural gas are, in essence, paying for the cost of all consumers’ gas transmission. Davis notes that while typically the larger consumers may be wealthy families who consume without regard to cost, large low-income families that are, by necessity, higher consumers may also carrying the burden.
“Our goal is to reform natural gas pricing to pave the way for the government to design a carbon policy,” says Davis.
The study found the easiest way to reform the pricing structure is to “level” prices by 1) imposing or increasing a monthly fee to equal the utilities’ fixed costs and, 2) imposing a separate pricing structure for actual consumption that decreases the price per unit of gas.
“This will increase bills for people who use very little gas, and decrease bills for people who use a lot. In related work with Haas School Professor Severin Borenstein, we are finding that families with children would tend to pay less, “says Davis.
In the proposal, all residential customers would pay the same monthly fee and the same rate per unit of gas. Commercial and industrial customers would pay higher monthly fees, commensurate with the more expensive metering and distribution equipment required for these customers.
Davis says this recommendation is similar to most current telephone service agreements. Customers pay a standard monthly fee that pays for the telecommunication companies’ infrastructure, plus additional charges based on the number and time of calls made.
“Energy is central to everything we do. It’s just critical that it is priced appropriately,” says Davis, “By pricing at marginal cost, that lays the foundation for having carbon policy work the way it is supposed to work where carbon taxes aren’t passed along to consumers unfairly.”
In addition to addressing efficiency in pricing, Davis is interested in studying the negative distributional consequences of pricing reform and their affect on low-income families.
Watch Lucas Davis talk about his research. http://bit.ly/bqX20I
See the full paper: http://faculty.haas.berkeley.edu/ldavis/mc.pdf
Pamela Tom | Newswise Science News
Physics of bubbles could explain language patterns
25.07.2017 | University of Portsmouth
Obstructing the ‘inner eye’
07.07.2017 | Friedrich-Schiller-Universität Jena
Strong light-matter coupling in these semiconducting tubes may hold the key to electrically pumped lasers
Light-matter quasi-particles can be generated electrically in semiconducting carbon nanotubes. Material scientists and physicists from Heidelberg University...
Fraunhofer IPA has developed a proximity sensor made from silicone and carbon nanotubes (CNT) which detects objects and determines their position. The materials and printing process used mean that the sensor is extremely flexible, economical and can be used for large surfaces. Industry and research partners can use and further develop this innovation straight away.
At first glance, the proximity sensor appears to be nothing special: a thin, elastic layer of silicone onto which black square surfaces are printed, but these...
3-D shape acquisition using water displacement as the shape sensor for the reconstruction of complex objects
A global team of computer scientists and engineers have developed an innovative technique that more completely reconstructs challenging 3D objects. An ancient...
Physicists have developed a new technique that uses electrical voltages to control the electron spin on a chip. The newly-developed method provides protection from spin decay, meaning that the contained information can be maintained and transmitted over comparatively large distances, as has been demonstrated by a team from the University of Basel’s Department of Physics and the Swiss Nanoscience Institute. The results have been published in Physical Review X.
For several years, researchers have been trying to use the spin of an electron to store and transmit information. The spin of each electron is always coupled...
What is the mass of a proton? Scientists from Germany and Japan successfully did an important step towards the most exact knowledge of this fundamental constant. By means of precision measurements on a single proton, they could improve the precision by a factor of three and also correct the existing value.
To determine the mass of a single proton still more accurate – a group of physicists led by Klaus Blaum and Sven Sturm of the Max Planck Institute for Nuclear...
26.07.2017 | Event News
21.07.2017 | Event News
19.07.2017 | Event News
26.07.2017 | Earth Sciences
26.07.2017 | Materials Sciences
26.07.2017 | Physics and Astronomy