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
New study from the University of Halle: How climate change alters plant growth
12.01.2018 | Martin-Luther-Universität Halle-Wittenberg
Disarray in the brain
18.12.2017 | Universität zu Lübeck
On the way to an intelligent laboratory, physicists from Innsbruck and Vienna present an artificial agent that autonomously designs quantum experiments. In initial experiments, the system has independently (re)discovered experimental techniques that are nowadays standard in modern quantum optical laboratories. This shows how machines could play a more creative role in research in the future.
We carry smartphones in our pockets, the streets are dotted with semi-autonomous cars, but in the research laboratory experiments are still being designed by...
What enables electrons to be transferred swiftly, for example during photosynthesis? An interdisciplinary team of researchers has worked out the details of how...
For the first time, scientists have precisely measured the effective electrical charge of a single molecule in solution. This fundamental insight of an SNSF Professor could also pave the way for future medical diagnostics.
Electrical charge is one of the key properties that allows molecules to interact. Life itself depends on this phenomenon: many biological processes involve...
At the JEC World Composite Show in Paris in March 2018, the Fraunhofer Institute for Laser Technology ILT will be focusing on the latest trends and innovations in laser machining of composites. Among other things, researchers at the booth shared with the Aachen Center for Integrative Lightweight Production (AZL) will demonstrate how lasers can be used for joining, structuring, cutting and drilling composite materials.
No other industry has attracted as much public attention to composite materials as the automotive industry, which along with the aerospace industry is a driver...
Scientists at Tokyo Institute of Technology (Tokyo Tech) and Tohoku University have developed high-quality GFO epitaxial films and systematically investigated their ferroelectric and ferromagnetic properties. They also demonstrated the room-temperature magnetocapacitance effects of these GFO thin films.
Multiferroic materials show magnetically driven ferroelectricity. They are attracting increasing attention because of their fascinating properties such as...
08.01.2018 | Event News
11.12.2017 | Event News
08.12.2017 | Event News
19.01.2018 | Materials Sciences
19.01.2018 | Health and Medicine
19.01.2018 | Physics and Astronomy