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
Smart Data Transformation – Surfing the Big Wave
02.12.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
Climate change could outpace EPA Lake Champlain protections
18.11.2016 | University of Vermont
Physicists of the University of Würzburg have made an astonishing discovery in a specific type of topological insulators. The effect is due to the structure of the materials used. The researchers have now published their work in the journal Science.
Topological insulators are currently the hot topic in physics according to the newspaper Neue Zürcher Zeitung. Only a few weeks ago, their importance was...
In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.
Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...
Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...
A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.
Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...
In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.
“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...
16.11.2016 | Event News
01.11.2016 | Event News
14.10.2016 | Event News
09.12.2016 | Life Sciences
09.12.2016 | Ecology, The Environment and Conservation
09.12.2016 | Health and Medicine