Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Study Calls for Natural Gas Pricing Reform to Facilitate Carbon Tax Policy

08.07.2010
As federal legislators and regulators consider taxing utility companies for carbon emissions, a new UC Berkeley study suggests a fixed pricing structure on natural gas service that would protect consumers and satisfy utility companies.

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
Further information:
http://www.haas.berkeley.edu

More articles from Studies and Analyses:

nachricht Multi-year study finds 'hotspots' of ammonia over world's major agricultural areas
17.03.2017 | University of Maryland

nachricht Diabetes Drug May Improve Bone Fat-induced Defects of Fracture Healing
17.03.2017 | Deutsches Institut für Ernährungsforschung Potsdam-Rehbrücke

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: A Challenging European Research Project to Develop New Tiny Microscopes

The Institute of Semiconductor Technology and the Institute of Physical and Theoretical Chemistry, both members of the Laboratory for Emerging Nanometrology (LENA), at Technische Universität Braunschweig are partners in a new European research project entitled ChipScope, which aims to develop a completely new and extremely small optical microscope capable of observing the interior of living cells in real time. A consortium of 7 partners from 5 countries will tackle this issue with very ambitious objectives during a four-year research program.

To demonstrate the usefulness of this new scientific tool, at the end of the project the developed chip-sized microscope will be used to observe in real-time...

Im Focus: Giant Magnetic Fields in the Universe

Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.

The results will be published on March 22 in the journal „Astronomy & Astrophysics“.

Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...

Im Focus: Tracing down linear ubiquitination

Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.

Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...

Im Focus: Perovskite edges can be tuned for optoelectronic performance

Layered 2D material improves efficiency for solar cells and LEDs

In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...

Im Focus: Polymer-coated silicon nanosheets as alternative to graphene: A perfect team for nanoelectronics

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

International Land Use Symposium ILUS 2017: Call for Abstracts and Registration open

20.03.2017 | Event News

CONNECT 2017: International congress on connective tissue

14.03.2017 | Event News

ICTM Conference: Turbine Construction between Big Data and Additive Manufacturing

07.03.2017 | Event News

 
Latest News

Transport of molecular motors into cilia

28.03.2017 | Life Sciences

A novel hybrid UAV that may change the way people operate drones

28.03.2017 | Information Technology

NASA spacecraft investigate clues in radiation belts

28.03.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>