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Political Ideology and U.S. Electric Vehicle Adoption
(with Jing Li and Katalin Springel). Journal of the Association of Environmental and Resource Economists, forthcoming.
Abstract
The prospect for electric vehicles (EVs) as a climate change solution hinges on their widespread adoption across political lines. This paper uses county-level data to show that from 2012–2023, about half of all new EV registrations in the U.S. went to the 10% most Democratic counties, and about one-third went to the top 5%. This correlation is largely stable over time, and remains after controlling for household income, gasoline prices, and other observables. EV trucks are a small share of the EV market, but show a lower correlation than other EV types. We also conducted a survey, finding little difference in the ability of Democrats and Republicans to answer questions about EVs.
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Uber and Traffic Fatalities
(with Michael Anderson). Review of Economics and Statistics, 2026, 108(2), 525–532.
Abstract
Previous studies of the effect of ridesharing on traffic fatalities have yielded inconsistent conclusions. We revisit this question using proprietary data from Uber measuring monthly rideshare activity at the Census tract level. We find a consistent negative effect of ridesharing on traffic fatalities, with impacts concentrated during nights and weekends. Our results imply that ridesharing has decreased U.S. traffic fatalities by 5.2% in areas where it operates. The annual life-saving benefits are $6.8 billion. Back-of-the-envelope calculations suggest that these benefits are of similar magnitude to producer surplus captured by Uber shareholders or consumer surplus captured by Uber riders.
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Competitive Effects of Entry in Gasoline Markets
(with Shaun McRae and Enrique Seira). Journal of Industrial Economics, 2025, 73(4), 589–607.
Abstract
We use panel data on the location, prices, and quality of the universe of gas stations in Mexico to study the competitive effects of entry on incumbent firms. Using more than 1,000 entry events and defining local markets based on the road network, we find that the entry of a new station within 3 min driving time decreases regular gasoline prices by 6% of the retail price spread. Competitive effects decline with travel time and are largest in markets that previously had only one station. Entry of stations with the same owner as the incumbent has near-zero effects. The effect of competition on quality is less clear, with suggestive evidence of improved service quality in some specifications.
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What Matters for Electrification? Evidence from 70 Years of U.S. Home Heating Choices
Review of Economics and Statistics, 2025, 107(3), 668–684.
Abstract
The percentage of U.S. homes heated with electricity has increased steadily from 1% in 1950 to 40% in 2020. Energy prices, geography, climate, housing characteristics, and income are shown to explain 90% of the increase, with energy prices by far the most important factor. The paper then estimates the cost of an electrification mandate for new homes. Households in warm states tend to prefer electricity anyway, so would be made worse off by less than $350 annually on average. Households in cold states, however, tend to prefer natural gas so would be made worse off by more than $1,000 annually.
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The Distributional Effects of U.S. Tax Credits for Heat Pumps, Solar Panels, and Electric Vehicles
(with Severin Borenstein). National Tax Journal, 2025, 78(1), 263–288.
Abstract
U.S. households have received more than $47 billion in tax credits since 2006 for heat pumps, solar panels, electric vehicles, and other “clean energy” technologies. Using information from tax returns, we show that these tax credits have gone predominantly to higher-income filers. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the tax credit for electric vehicles, for which the top quintile has received more than 80%. These patterns have changed little over time. We then present evidence on cost-effectiveness and discuss broader economic considerations.
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The Economic Determinants of Heat Pump Adoption
NBER Environmental and Energy Policy and the Economy, 2024, 5(1), 162–199, University of Chicago Press.
Abstract
One concern with subsidies for low-carbon technologies is that they tend to go predominantly to high-income households. Previous research has shown, for example, that the top income quintile receives 60% of subsidies for rooftop solar and 90% of subsidies for electric vehicles. This paper finds that heat pumps are an important exception. Using newly available US nationally representative data, the paper finds that there is remarkably little correlation between heat pump adoption and household income. Nationwide, 14% of US households have a heat pump as their primary heating equipment, and adoption levels are essentially identical for all income levels ranging from the bottom of the income distribution (<$30,000 annually) to the top ($150,000+). Instead, the paper shows that heat pump adoption is strongly correlated with geography, climate, and electricity prices.
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Transmission Impossible? Prospects for Decarbonizing the U.S. Grid
(with Catherine Hausman and Nancy Rose). Journal of Economic Perspectives, 2023, 37(4), 155–180.
Abstract
Encouraged by the declining cost of grid-scale renewables, recent analyses conclude that the United States could reach net zero carbon dioxide emissions by 2050 at relatively low cost using currently available technologies. While the cost of renewable generation has declined dramatically, integrating these renewables would require a large expansion in transmission to deliver that power. Already there is growing evidence that the United States has insufficient transmission capacity, and current levels of annual investment are well below what would be required for a renewables-dominated system. We describe a variety of challenges that make it difficult to build new transmission and potential policy responses to mitigate them, as well as possible substitutes for some new transmission capacity.
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Electric Vehicles in Multi-Vehicle Households
Applied Economics Letters, 2023, 30(14), 1909–1912.
Abstract
This paper uses U.S. nationally representative data from the 2017 National Household Travel Survey to present a series of facts about electric vehicles (EVs) in multi-vehicle households. First, as of the time of the survey, 89% of households with an EV also had a non-electric vehicle in addition to the EV. Second, 60% of households with an EV also had a non-electric SUV, truck, or minivan. Third, 66% of households with an EV also had a non-electric vehicle that was driven more miles per year. The paper argues that these patterns have significant implications for the environmental impact of EVs and underscore the importance of better understanding how multi-vehicle households substitute between vehicles.
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Evidence of a Homeowner-Renter Gap for Electric Appliances
Energy Journal, 2023, 44(4), 53–64.
Abstract
This paper provides the first empirical analysis of the homeowner-renter gap for electric appliances. Using U.S. nationally representative data, the analysis shows that renters are significantly more likely than homeowners to have electric heat, electric hot water heating, an electric stove, and an electric dryer. The gap is highly statistically significant, prevalent across regions, and holds after controlling for the type, size, and age of the home, as well as for climate and household characteristics. The paper argues that this gap arises from the same split incentives that lead to the “landlord-tenant problem” and discusses the implications of the gap for an emerging set of policies aimed at reducing carbon dioxide emissions through building electrification.
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Who Will Pay for Legacy Utility Costs?
(with Catherine Hausman). Journal of the Association of Environmental and Resource Economists, 2022, 9(6), 1047–1085.
Abstract
The growing “electrify everything” movement aims to reduce carbon dioxide emissions by transitioning households and firms away from natural gas toward electricity. This paper considers what this transition means for the customers who are left behind. Using historical evidence from growing and shrinking U.S. natural gas utilities, we show that utilities add pipelines but rarely remove them, even when the customer base from which to recover costs is shrinking. Correspondingly, we find that utility revenues decrease less than one for one when a customer base is shrinking, consistent with higher bills for remaining customers. We then use our empirical estimates to predict how customer bills might increase in the future for different levels of building electrification. We highlight the equity implications of our results and conclude by discussing alternative utility financing options such as recouping fixed costs through taxes rather than prices.
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Air Conditioning and Global Inequality
(with Paul Gertler, Stephen Jarvis, and Catherine Wolfram). Global Environmental Change, 2021, 69, 102299.
Abstract
As global temperatures go up and incomes rise, air conditioner sales are poised to increase dramatically. Recent studies explore the potential economic and environmental impacts of this growth, but relatively little attention has been paid to the implications for inequality. In this paper we use household-level microdata from 16 countries to characterize empirically the relationship between climate, income, and residential air conditioning. We show that both current and future air conditioner usage is concentrated among high-income households. Not only do richer countries have much more air conditioning than poorer countries, but within countries adoption is highly concentrated among high-income households. We discuss implications for health, productivity, and educational inequality.
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Estimating the Price Elasticity of Demand for Subways: Evidence from Mexico
Regional Science and Urban Economics, 2021, 87, 103651.
Abstract
This paper uses fare changes in Mexico City, Guadalajara, and Monterrey to estimate the price elasticity of demand for urban rail transit. In two of the cases there is a significant fare increase (30%+), and in the third there is a 60-day fare holiday. Ridership responds sharply in the expected direction in all three cities, implying price elasticities which range across cities from −0.23 to −0.32. In addition, there is suggestive evidence that the temporary fare holiday led to a higher baseline level of ridership. These estimates are directly relevant for policymakers considering alternative pricing structures for urban rail. The paper discusses the relevant economic considerations and then shows how the estimated elasticities can be used to perform policy counterfactuals.
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Are Energy Executives Rewarded for Luck?
(with Catherine Hausman). Energy Journal, 2020, 41(6), 157–181.
Abstract
In this paper, we examine executive compensation data from 78 major U.S. oil and gas companies over a 24-year period. Perhaps in no other industry are the fortunes of so many executives so dependent on a single global commodity price. We find that a 10% increase in oil prices is associated with a 2% increase in executive compensation. This oil price effect holds for both CEOs and non-CEOs and separately for several different individual components of compensation, including bonuses. We find that the oil price effect is larger in companies with more insiders on the board, and asymmetric, with executive compensation rising with increasing oil prices more than it falls with decreasing oil prices. We then discuss potential mechanisms drawn from the broader existing literature on executive compensation.
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An Empirical Test of Hypercongestion in Highway Bottlenecks
(with Michael Anderson). Journal of Public Economics, 2020, 187, 104197.
Abstract
There is a widely-held view that as demand for travel goes up, this decreases not only speed but also the capacity of the road system, a phenomenon known as hypercongestion. We revisit this idea in the context of highway bottlenecks. We propose an empirical test using an event study design to measure changes in highway capacity at the onset of queue formation. We apply this test to three highway bottlenecks in California for which detailed data on traffic flows and vehicles speeds are available. We find no evidence of a reduction in highway capacity at any of the three sites during periods of high demand. Across sites and specifications we have sufficient statistical power to rule out even small reductions in highway capacity. This lack of evidence of hypercongestion stands in sharp contrast to most previous studies and informs core models in urban and transportation economics.
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How Effective is Energy-Efficient Housing? Evidence from a Field Trial in Mexico
(with Sebastian Martinez and Bibiana Taboada). Journal of Development Economics, 2020, 143, 102390.
Abstract
Despite growing enthusiasm, there is still much to be learned about how well energy-efficiency investments work in practice. Evidence is particularly lacking from low- and middle-income countries, despite a widespread view that these countries have many of the best opportunities. This paper evaluates a field trial in Mexico in which a quasi-experimental sample of new homes was provided with insulation and other energy-efficient upgrades. A novel feature of our study is that we deploy large numbers of data loggers which allow us to measure temperature and humidity at high frequency inside homes. We find that the upgrades had no detectable impact on electricity use or thermal comfort, with essentially identical temperature and humidity levels in upgraded and non-upgraded homes. We document that most households have their windows open on hot days, nullifying the thermal benefits of the upgrades. These results stand in sharp contrast to the engineering estimates that predicted up to a 26% decrease in electricity use.
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Should Electric Vehicle Drivers Pay a Mileage Tax?
(with James Sallee). NBER Environmental and Energy Policy and the Economy, 2020, 1(1), 65–94, University of Chicago Press.
Abstract
In many countries, the revenue from gasoline taxes is used to fund highways and other transportation infrastructure. As the number of electric vehicles on the road increases, this raises questions about the effectiveness and equity of this financing mechanism. In this paper, we ask whether electric vehicle drivers should pay a mileage tax. Though the gasoline tax has been traditionally viewed as a benefits tax, we instead take the perspective of economic efficiency. We derive a condition for the optimal electric vehicle mileage tax that highlights a key trade-off. On the one hand, there are externalities from driving, including traffic congestion and accidents, that imply a mileage tax is efficient. On the other hand, gasoline tends to be underpriced, so a low (or even negative) mileage tax might have efficiency benefits in encouraging substitution away from gasoline-powered vehicles.
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Do Energy Efficiency Investments Deliver at the Right Time?
(with Judson Boomhower). American Economic Journal: Applied Economics, 2020, 12(1), 115–139.
Abstract
Most analyses of energy efficiency investments ignore that the value of electricity varies widely across hours. We show how much timing matters. Using novel hourly consumption data from an air conditioner rebate program in California, we find that energy savings are concentrated in high-value hours. This significantly increases the value of these investments, especially after we account for the large capacity payments that electricity generators receive to guarantee supply in peak hours. We then use engineering predictions to calculate timing premiums for a wide range of energy efficiency investments, finding substantial variation in economic value across investments.
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Heat Exposure and Global Air Conditioning
(with Leopold Biardeau, Paul Gertler, and Catherine Wolfram). Nature Sustainability, 2020, 3, 25–28.
Abstract
Air conditioning adoption is increasing dramatically worldwide as incomes rise and average temperatures go up. Using daily temperature data from 14,500 weather stations, we rank 219 countries and 1,692 cities based on a widely used measure of cooling demand called total cooling degree day exposure. India, China, Indonesia, Nigeria, Pakistan, Brazil, Bangladesh and the Philippines all have more total cooling degree day exposure than the United States—a country that uses 400 terawatt-hours of electricity annually for air conditioning.
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An Economic Perspective on Mexico's Nascent Deregulation of Retail Petroleum Markets
(with Shaun McRae and Enrique Seira). Economics of Energy & Environmental Policy, 2019, 8(2), 181–199.
Abstract
Retail petroleum markets in Mexico are on the cusp of a historic deregulation. For decades, all 11,000 gasoline stations nationwide have carried the brand of the state-owned petroleum company Pemex and sold Pemex gasoline at federally regulated retail prices. This industry structure is changing, however, as part of Mexico's broader energy reforms aimed at increasing private investment. Since April 2016, independent companies can import, transport, store, distribute, and sell gasoline and diesel. In this paper, we provide an economic perspective on Mexico's nascent deregulation. Although in many ways the reforms are unprecedented, we argue that past experiences in other markets give important clues about what to expect, as well as about potential pitfalls. Turning Mexico's retail petroleum sector into a competitive market will not be easy, but the deregulation has enormous potential to increase efficiency and, eventually, to reduce prices.
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How Much Are Electric Vehicles Driven?
Applied Economics Letters, 2019, 26(18), 1497–1502.
Abstract
The prospect for electric vehicles as a climate change solution hinges on their ability to reduce gasoline consumption. But this depends on how many miles electric vehicles are driven and on how many miles would have otherwise been driven in gasoline-powered vehicles. Using newly-available U.S. nationally representative data, this paper finds that electric vehicles are driven considerably fewer miles per year on average than gasoline-powered vehicles. The difference is highly statistically significant and holds for both all-electric and plug-in hybrid vehicles, for both single- and multiple-vehicle households, and both inside and outside California. Overall, the evidence suggests that today's electric vehicles imply smaller environmental benefits than previously believed.
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Evidence of a Homeowner-Renter Gap for Electric Vehicles
Applied Economics Letters, 2019, 26(11), 927–932.
Abstract
This paper provides the first empirical analysis of the homeowner-renter gap for electric vehicles. Using nationally representative data from the U.S. Department of Transportation's 2017 National Household Travel Survey, I show that homeowners are three times more likely than renters to own an electric vehicle. The gap is highly statistically significant, and remains even after controlling for income. For example, among households with annual income between $75,000 and $100,000, 1 in 130 homeowners owns an electric vehicle, compared to 1 in 370 renters. Additional controls do little to narrow the gap. I argue that this is a version of what economists have called the “landlord-tenant” problem, and I discuss this and other possible causes as well as potential policy implications.
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Are Fuel Economy Standards Regressive?
(with Chris Knittel). Journal of the Association of Environmental and Resource Economists, 2019, 6, 37–63.
Abstract
Despite widespread agreement that a carbon tax would be more efficient, many countries use fuel economy standards to reduce transportation-related carbon dioxide emissions. We pair a simple model of the automakers' profit maximization problem with unusually rich nationally representative data on vehicle registrations to estimate the distributional impact of U.S. fuel economy standards. The key insight from the model is that fuel economy standards impose a constraint on automakers that creates an implicit subsidy for fuel-efficient vehicles and an implicit tax for fuel-inefficient vehicles. Moreover, when these obligations are tradable, permit prices make it possible to quantify the exact magnitude of these implicit subsidies and taxes. We use the model to determine which vehicles are most subsidized and taxed, and we compare the pattern of ownership of these vehicles between high- and low-income census tracts.
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The Environmental Cost of Global Fuel Subsidies
Energy Journal, 2017, 38, 7–27.
Abstract
Despite increasing calls for reform many countries continue to provide subsidies for gasoline and diesel. This paper quantifies the external costs from global fuel subsidies using the latest available data and estimates from the World Bank and International Monetary Fund. Under preferred assumptions about supply and demand elasticities, current subsidies cause $44 billion in external costs annually. This includes $8 billion from carbon dioxide emissions, $7 billion from local pollutants, $12 billion from traffic congestion, and $17 billion from accidents. These external costs are in addition to conventional deadweight loss, estimated to be $26 billion annually. Government incentives for alternative fuel vehicles and other forms of energy efficiency can mitigate these external costs, but are unlikely to be a robust substitute for fuel subsidy reform.
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Evidence of a Decline in Electricity Use by U.S. Households
Economics Bulletin, 2017, 37(2), 1098–1105.
Abstract
This paper shows that U.S. households use less electricity than they did five years ago. The decrease has been experienced broadly, in virtually all U.S. states and across all seasons of the year. This pattern stands in sharp contrast to steady increases throughout previous decades and has significant implications for household budgets, energy markets, and the environment. I discuss some of the implications of the decline and then take preliminary steps toward identifying potential explanations. While multiple factors have contributed, I argue that the rapid emergence of LEDs and other energy-efficient lighting has played a particularly important role.
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Anticipation, Tax Avoidance, and the Price Elasticity of Demand for Gasoline
(with John Coglianese, Lutz Kilian, and James Stock). Journal of Applied Econometrics, 2017, 32(1), 1–15.
Abstract
Least-squares estimates of the response of gasoline consumption to a change in the gasoline price are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We demonstrate that anticipatory behavior provides an important explanation for this result. Gasoline buyers increase purchases before tax increases and delay purchases before tax decreases, rendering the tax instrument endogenous. Including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower elasticity estimates.
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Saturday Driving Restrictions Fail to Improve Air Quality in Mexico City
Scientific Reports, February 2017.
Abstract
Policymakers around the world are turning to license-plate based driving restrictions in an effort to address urban air pollution. The format differs across cities, but most programs restrict driving once or twice a week during weekdays. This paper focuses on Mexico City, home to one of the oldest and best-known driving restriction policies. For almost two decades Mexico City's driving restrictions applied during weekdays only. This changed recently, however, when the program was expanded to include Saturdays. This paper uses hourly data from pollution monitoring stations to measure the effect of the Saturday expansion on air quality. Overall, there is little evidence that the program expansion improved air quality. Across eight major pollutants, the program expansion had virtually no discernible effect on pollution levels. These disappointing results stand in sharp contrast to estimates made before the expansion which predicted a 15%+ decrease in vehicle emissions on Saturdays.
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Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels
(with Gilbert Metcalf). Journal of the Association of Environmental and Resource Economists, 2016, 3(3), 589–625.
Abstract
Information provision is a key element of government energy-efficiency policy, but the information that is provided is often too coarse to allow consumers to make efficient decisions. An important example is the ubiquitous yellow “EnergyGuide” label, which is required by law to be displayed on all major appliances sold in the United States. These labels report energy cost information based on average national usage and energy prices. We conduct an online stated-choice experiment to measure the potential welfare benefits from labels tailored to each household's state of residence. We find that state-specific labels lead to significantly better choices. Consumers choose to invest about the same amount overall in energy efficiency, but the allocation is much better with more investment in high-usage high-price states and less investment in low-usage low-price states.
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The Distributional Effects of U.S. Clean Energy Tax Credits
(with Severin Borenstein). NBER Tax Policy and the Economy, 2016, 30(1), 191–234.
Abstract
Since 2006, U.S. households have received more than $18 billion in federal income tax credits for weatherizing their homes, installing solar panels, buying hybrid and electric vehicles, and other “clean energy” investments. We use tax return data to examine the socioeconomic characteristics of program recipients. We find that these tax expenditures have gone predominantly to higher-income Americans. The bottom three income quintiles have received about 10% of all credits, while the top quintile has received about 60%. The most extreme is the program aimed at electric vehicles, where we find that the top income quintile has received about 90% of all credits. By comparing to previous work on the distributional consequences of pricing greenhouse gas emissions, we conclude that tax credits are likely to be much less attractive on distributional grounds than market mechanisms to reduce greenhouse gases.
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Market Impacts of a Nuclear Power Plant Closure
(with Catherine Hausman). American Economic Journal: Applied Economics, 2016, 8(2), 92–122.
Abstract
Falling revenues and rising costs have put US nuclear plants in financial trouble, and some threaten to close. To understand the potential private and social consequences, we examine the abrupt closure of the San Onofre Nuclear Generating Station (SONGS) in 2012. Using a novel econometric approach, we show that the lost generation from SONGS was met largely by increased in-state natural gas generation. In the twelve months following the closure, natural gas generation costs increased by $350 million. The closure also created binding transmission constraints, causing short-run inefficiencies and potentially making it more profitable for certain plants to act noncompetitively.
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Contribution of Air Conditioning Adoption to Future Energy Use under Global Warming
(with Paul Gertler). Proceedings of the National Academy of Sciences, 2015, 112(19), 5962–5967.
Abstract
The use of air conditioning is poised to increase dramatically over the next several decades as global temperatures go up and incomes rise around the world. In this paper, we use high-quality microdata from Mexico to characterize empirically the relationship between temperature, income, and air conditioning. We describe both how electricity consumption increases with temperature given current levels of air conditioning, and how climate and income drive air conditioning adoption decisions. We then combine these estimates with predicted end-of-century temperature changes to forecast future energy consumption. Overall, our results point to air conditioning impacts being considerably larger than previously estimated, with adoption near saturation for warm areas of middle-income countries.
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Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings
(with Janet Currie, Michael Greenstone, and Reed Walker). American Economic Review, 2015, 105(2), 678–709.
Abstract
Regulatory oversight of toxic emissions from industrial plants and understanding about these emissions' impacts are in their infancy. Applying a research design based on the openings and closings of 1,600 industrial plants to rich data on housing markets and infant health, we find that: toxic air emissions affect air quality only within 1 mile of the plant; plant openings lead to 11 percent declines in housing values within 0.5 mile or a loss of about $4.25 million for these households; and a plant's operation is associated with a roughly 3 percent increase in the probability of low birthweight within 1 mile.
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Bonding Requirements for Natural Gas Producers
Review of Environmental Economics and Policy, 2015, 9(1), 128–144.
Abstract
Natural gas producers are constantly making tradeoffs between money, time, and environmental risk. The private costs and benefits of drilling are realized immediately, but the external costs are not. This means that by the time external costs are well understood, producers may no longer exist or may not have sufficient resources to finance necessary cleanups or to compensate those who have been adversely affected. Because producers do not face the total cost of potential external damages, they may take too many risks. This article discusses alternative regulatory approaches for mitigating moral hazard in U.S. natural gas production. Particular emphasis is given to bonding requirements, which have tended to receive less attention from policy makers than other approaches but have a long history. Although the use of bonding has important limitations, this approach is quite well suited to addressing many of the environmental risks in this market.
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An Economic Perspective on the EPA's Clean Power Plan
(with Meredith Fowlie, Lawrence Goulder, Matthew Kotchen, James Bushnell, Michael Greenstone, Charles Kolstad, Christopher Knittel, Robert Stavins, Michael Wara, Frank Wolak, and Catherine Wolfram). Science, 2014, 346(6211), 815–816.
Abstract
In June, the Obama Administration unveiled its proposal for a Clean Power Plan, which it estimates would reduce carbon dioxide (CO2) emissions from existing U.S. power plants 30% below 2005 levels by 2030. Power plant emissions have declined substantially since 2005, so the plan is seeking reductions of about 18% from current levels. Electricity generation accounts for about 40% of U.S. CO2 emissions. We examine whether the plan will achieve its intended emissions reductions, and how it can do so in the most cost-effective manner, highlighting the role of cross-state coordination in lowering compliance costs.
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Cash for Coolers: Evaluating a Large-Scale Appliance Replacement Program in Mexico
(with Alan Fuchs and Paul Gertler). American Economic Journal: Economic Policy, 2014, 6(4), 207–238.
Abstract
This paper evaluates a large-scale appliance replacement program in Mexico that from 2009 to 2012 helped 1.9 million households replace their old refrigerators and air conditioners with energy-efficient models. Using household-level billing records from the universe of Mexican residential customers, we find that refrigerator replacement reduces electricity consumption by 8 percent, about one-quarter of what was predicted by ex ante analyses. Moreover, we find that air conditioning replacement actually increases electricity consumption. Overall, we find that the program is an expensive way to reduce externalities from energy use, reducing carbon dioxide emissions at a program cost of over $500 per ton.
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A Credible Approach for Measuring Inframarginal Participation in Energy Efficiency Programs
(with Judson Boomhower). Journal of Public Economics, 2014, 113, 67–79.
Abstract
Economists have long argued that many recipients of energy-efficiency subsidies may be “non-additional,” getting paid to do what they would have done anyway. Demonstrating this empirically has been difficult, however, because of endogeneity concerns and other challenges. In this paper we use a regression discontinuity analysis to examine participation in a large-scale residential energy-efficiency program. Comparing behavior just on either side of several eligibility thresholds, we find that program participation increases with larger subsidy amounts, but that most households would have participated even with much lower subsidy amounts. We illustrate the welfare loss introduced by transfers to inframarginal participants and show how the optimal subsidy amount depends on the relative shares of marginal and inframarginal participants.
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The Economic Cost of Global Fuel Subsidies
American Economic Review: Papers and Proceedings, 2014, 104(5), 581–585.
Abstract
By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline assumptions about supply and demand elasticities, the total annual deadweight loss worldwide is $44 billion. Incorporating external costs increases the economic costs substantially.
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The Equity and Efficiency of Two-Part Tariffs in U.S. Natural Gas Markets
(with Severin Borenstein). Journal of Law and Economics, 2012, 55(1), 75–128.
Abstract
Residential natural gas customers in the United States face volumetric charges that average about 30 percent more than the marginal cost of gas. This inefficient departure from marginal cost pricing allows gas utilities to cover their fixed infrastructure and operating costs. Proposals for recovering these costs instead through fixed monthly fees are often opposed because of a widespread belief that current rate schedules have desirable distributional consequences. We examine this question using a novel data set of more than 200,000 households nationwide. We find that alternative rate structures aimed at restoring marginal cost pricing would have at most a modestly regressive impact on the distribution of welfare across customers, with high-income households gaining slightly more on average than low-income households.
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Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power
(with Catherine Wolfram). American Economic Journal: Applied Economics, 2012, 4(4), 194–225.
Abstract
For the first four decades of its existence the U.S. nuclear power industry was run by regulated utilities, with most companies owning only one or two reactors. Beginning in the late 1990s electricity markets in many states were deregulated and almost half of the nation's 103 reactors were sold to independent power producers selling power in competitive wholesale markets. Deregulation has been accompanied by substantial market consolidation and today the three largest companies control more than one-third of all U.S. nuclear capacity. We find that deregulation and consolidation are associated with a 10 percent increase in operating efficiency, achieved primarily by reducing the frequency and duration of reactor outages. At average wholesale prices the value of this increased efficiency is approximately $2.5 billion annually and implies an annual decrease of almost 40 million metric tons of carbon dioxide emissions.
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Prospects for Nuclear Power
Journal of Economic Perspectives, 2012, 26(1), 49–66.
Abstract
Nuclear power has long been controversial because of concerns about nuclear accidents, storage of spent fuel, and how the spread of nuclear power might raise risks of the proliferation of nuclear weapons. These concerns are real and important. However, emphasizing these concerns implicitly suggests that unless these issues are taken into account, nuclear power would otherwise be cost effective compared to other forms of electricity generation. This implication is unwarranted. Throughout the history of nuclear power, a key challenge has been the high cost of construction for nuclear plants. Construction costs are high enough that it becomes difficult to make an economic argument for nuclear even before incorporating these external factors. This is particularly true in countries like the United States where recent technological advances have dramatically increased the availability of natural gas.
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Are Renters Less Likely to Have Energy-Efficient Appliances?
In Design and Implementation of U.S. Climate Policy, edited by D. Fullerton and C. Wolfram, 2012, University of Chicago Press.
Abstract
While public discussion of HR 2454 (the “Waxman-Markey” bill) has focused on the cap-and-trade program that would be established for carbon emissions, the bill also includes provisions that would tighten energy efficiency standards for consumer appliances. Supporters argue that appliance standards help address a number of market failures. In particular, many studies have pointed out that landlords may buy cheap inefficient appliances when their tenants pay the utility bill. Although this landlord-tenant problem has been widely discussed in the literature, there is little empirical evidence on the magnitude of the distortion. This paper compares appliance ownership patterns between homeowners and renters using household-level data from the Residential Energy Consumption Survey. The results show that, controlling for household income and other household characteristics, renters are significantly less likely to have energy-efficient refrigerators, clothes washers, and dishwashers.
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The Effect of Power Plants on Local Housing Prices and Rents
Review of Economics and Statistics, 2011, 93(4), 1391–1402.
Abstract
This paper uses restricted census microdata to examine housing values and rents for neighborhoods in the United States where power plants were opened during the 1990s. Compared to neighborhoods with similar housing and demographic characteristics, neighborhoods within 2 miles of plants experienced 3%–7% decreases in housing values and rents, with some evidence of larger decreases within 1 mile and for large-capacity plants. In addition, there is evidence of taste-based sorting, with neighborhoods near plants associated with modest but statistically significant decreases in mean household income, educational attainment, and the proportion owner-occupied.
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Estimating the Effect of a Gasoline Tax on Carbon Emissions
(with Lutz Kilian). Journal of Applied Econometrics, 2011, 26(7), 1187–1214.
Abstract
Several policy makers and economists have proposed the adoption of a carbon tax in the United States. It is widely recognized that such a tax in practice must take the form of a tax on the consumption of energy products such as gasoline. Although a large existing literature examines the sensitivity of gasoline consumption to changes in price, these estimates may not be appropriate for evaluating the effectiveness of such a tax. First, most of these studies fail to address the endogeneity of gasoline prices. Second, the responsiveness of gasoline consumption to a change in tax may differ from the responsiveness of consumption to an average change in price. We address these challenges using a variety of methods including traditional single-equation regression models and structural vector autoregressions. Our preferred estimates imply that a 10 cent per gallon increase in the gasoline tax would decrease carbon emissions from vehicles in the United States by about 1.5%.
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The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas
(with Lutz Kilian). Journal of Political Economy, 2011, 119(2), 212–241.
Abstract
A direct consequence of restricting the price of a good for which secondary markets do not exist is that, in the presence of excess demand, the good will not be allocated to the buyers who value it the most. We demonstrate the empirical importance of this allocative cost for the U.S. residential market for natural gas, which was subject to price ceilings during 1954–89. Using a household-level, discrete-continuous model of natural gas demand, we estimate that the allocative cost in this market averaged $3.6 billion annually, nearly tripling previous estimates of the net welfare loss to U.S. consumers.
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The Effects of Preferential VAT Rates Near International Borders: Evidence from Mexico
National Tax Journal, 2011, 64(1), 85–104.
Abstract
Most goods and services in Mexico are subject to a 16 percent value added tax (VAT). However, within 20 kilometers of the border with the United States, the VAT rate is 11 percent. This preferential rate was implemented by the Mexican Department of Revenue to reduce cross-border shopping in the United States. However, the tax differential also creates an unusual distortion within Mexico, encouraging Mexicans to travel to the preferential tax zone for shopping. This paper performs an empirical test of tax avoidance using the Mexican Economic Census, comparing towns on either side of the 20 kilometer threshold using a regression discontinuity design. The analysis provides evidence of a modest but statistically significant distortion in economic activity toward the preferential tax zone.
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Do Americans Consume Too Little Natural Gas?
(with Erich Muehlegger). RAND Journal of Economics, 2010, 41(4), 791–810.
Abstract
This article measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991–2007. We find large departures from marginal cost pricing in residential and commercial markets. While industrial customers face prices that are close to marginal cost (2.5 percent markup), most residential and commercial customers face average markups of 40–50 percent above marginal cost. Based on conservative estimates of the price elasticity of demand for natural gas, our estimates imply an annual deadweight loss in the residential and commercial markets of $2.7 billion. Moreover, we find little evidence that these high markups are explained by demand-side factors such as external costs from natural gas consumption.
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International Trade in Used Vehicles: The Environmental Consequences of NAFTA
(with Matt Kahn). American Economic Journal: Economic Policy, 2010, 2(4), 58–82.
Abstract
Since trade restrictions were eliminated in 2005, Mexico has imported over 2.5 million used vehicles from the United States. Using a unique, vehicle-level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so when a vehicle is traded from the United States to Mexico average vehicle emissions per mile tend to decrease in both countries. Overall, however, the evidence suggests that trade has increased total lifetime emissions, primarily because of low vehicle retirement rates in Mexico.
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The Welfare Costs of Unreliable Water Service
(with Brian Baisa, Stephen Salant, and William Wilcox). Journal of Development Economics, 2010, 92(1), 1–12.
Abstract
Throughout the developing world, many water distribution systems are unreliable. As a result, it becomes necessary for each household to store its own water as a hedge against this uncertainty. Since arrivals of water are not synchronized across households, serious distributional inefficiencies arise. We develop a model describing the optimal intertemporal depletion of each household's private water storage if it is uncertain when water will next arrive to replenish supplies. The model is calibrated using survey data from Mexico City, a city where many households store water in sealed rooftop tanks known as tinacos. The calibrated model is used to evaluate the potential welfare gains that would occur if alternative modes of water provision were implemented.
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The Effect of Driving Restrictions on Air Quality in Mexico City
Journal of Political Economy, 2008, 116(1), 38–81.
Abstract
In 1989, the government of Mexico City introduced a program, Hoy No Circula, that bans most drivers from using their vehicles one weekday per week on the basis of the last digit of the vehicle's license plate. This article measures the effect of the driving restrictions on air quality using high-frequency measures from monitoring stations. Across pollutants and specifications there is no evidence that the restrictions have improved air quality. Evidence from additional sources indicates that the restrictions led to an increase in the total number of vehicles in circulation as well as a change in composition toward high-emissions vehicles.
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Durable Goods and Residential Demand for Energy and Water: Evidence from a Field Trial
RAND Journal of Economics, 2008, 39(2), 530–546.
Abstract
This article describes a household production model in which energy-efficient durable goods cost less to operate so households may use them more. The model is estimated using household-level data from a field trial in which participants received high-efficiency clothes washers free of charge. The estimation strategy exploits this quasi-random replacement of washers to derive precise estimates of the household production technology and a demand function for clothes washing. During the field trial, households increased clothes washing on average by 5.6% after receiving a high-efficiency washer, implying a price elasticity of −.06. The complete model is used to evaluate the cost-effectiveness of recent changes in minimum efficiency standards for clothes washers.
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The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster
American Economic Review, 2004, 94(5), 1693–1704.
Abstract
This paper measures the impact of an outbreak of pediatric leukemia on local housing values. A model of location choice is used to describe conditions under which the gradient of the hedonic price function with respect to pediatric leukemia risk is equal to household marginal willingness to pay to avoid risk. This equalizing differential is estimated using property-level sales records from a county in Nevada where residents recently experienced a severe increase in pediatric leukemia. Housing prices are compared before and after the increase with a nearby county acting as a control group. The variation in health risk over time makes it possible to control for unobserved differences across locations.