Category: Corporate Social Responsibility

Reflecting on Federal Regulatory Policy and the Future of Electric Vehicles

As I’ve discussed previously, the political barriers that exist in the U.S. Congress to the enactment of significant new climate change legislation will likely force the Biden administration to turn, at least in some cases, to regulatory approaches.  This is in addition to the numerous government subsidy programs that are part of the administration’s infrastructure plans, some of the most important of which are for diffusion of electric vehicles (EVs).

So, this is a particularly opportune time to reflect on the role of federal regulatory policy, as well as the outlook for EVs.  For that purpose, an exceptionally qualified observer is my newest podcast guest, Dr. John Graham, Dean Emeritus and Professor at the Paul O’Neill School of Public and Environmental Affairs at Indiana University, and former Administrator of the Office of Information and Regulatory Affairs (OIRA) in the U.S. Office of Management and Budget (OMB).

You can hear our complete conversation in the podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  John Graham obviously fits perfectly in this group, with tremendous experience both in academia and government.

John Graham is Dean Emeritus – and still a professor – at the Paul O’Neill School of Public and Environmental Affairs at Indiana University.  Previous to that, he was Dean of the Pardee RAND Graduate School in Santa Monica, California.  And before that, he served in the George W. Bush administration as the Administrator of OIRA.  And prior to that, he was a professor at the Harvard T.H. Chan School of Public Health in Boston, where he founded the Harvard Center for Risk Analysis.

In our podcast conversation, Dr. Graham offers his thoughts on Regulatory Impact Analysis, federal energy policy, domestic climate change policy, and electric vehicles.  He also talks about his early experiences in the Bush 43 White House, where he and his team had to make the case to the President to increase the stringency of Corporate Average Fuel Economy (CAFE) Standards at a time when the Vice President was opposed.

“We had to actually go into the Oval Office and make our case to President Bush. And when I did so, it was apparent that the president and the vice president were not totally on the same page on this issue, but we were able to persuade the president to move forward and we did so, and now it’s a very important part of the program that the federal government has on fuel economy and on carbon dioxide control,” he says.

Graham, whose Ph.D. dissertation was on the topic of automobile airbag technology, also discusses his new book, “The Global Rise of the Modern Plug-In Electric Vehicle: Public Policy, Innovation, and Strategy,” which outlines the significant ways in which the wide use of electric vehicles will influence our daily lives, economies, urban air quality, and global climate change.

“When I was working for George W. Bush, we were very convinced that the electric vehicle was not a very cost-effective technology, and we resisted strongly California’s efforts to mandate so-called zero-emission vehicles, and they really had in mind electric cars,” Graham explains. “But what has happened is the spillover of lithium-ion battery technology from consumer applications to the auto industry, [and the extent to which it] is now creating enormous excitement and innovation in the auto sector, and that’s the stimulation for the book.”

Graham predicts that electric vehicles will play a significant role in the future of transportation.

“The transition from the internal combustion engine to electric propulsion is in fact underway and irreversible seeds have been set to make this happen. However, the pace of the transition is going to move at very different rates in different parts of the world, and a lot of this depends as much on politics as it does on markets,” he says.

John Graham explains that Norway is leading the world with electric vehicles, making up 80 percent of the nation’s new car fleet. That compares to ten percent in Germany and the UK, and approximately three percent in the United States. Production in the USA will grow, Graham argues, once appropriate government policies are in place.

“This is one of these cases I find it fascinating where the industrial policy strategies, which many Western economists regard as in disrepute … are in fact the standard approach to making a big change in an industry like this, and I think that’s what’s going to have to happen. Now the details about whether the Biden Administration gets it right, it’s far too early to judge.”

My complete conversation with John Graham is the 23rd episode in the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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A New Day for U.S. Climate Change Policy?

There is certainly much enthusiasm and great expectations on both sides of the Atlantic Ocean regarding what can be expected from the new U.S. administration’s climate change policy.  I offered somewhat modest expectations in an essay posted at this blog in mid-January before the Biden-Harris team was inaugurated.  But now – in early April – major appointments have been made, executive orders announced, and new policies floated.  So, this is a good time take a preliminary look at what has been accomplished in the first 10 weeks or so of the administration.

For that purpose, an exceptionally qualified observer is my friend and colleague, and most recent podcast guest, Jody Freeman, the Archibald Cox Professor of Law at Harvard Law School, where she founded both the Environmental and Energy Law Program and the School’s Emmett Environmental Law Clinic (which was directed for many years by Wendy Jacobs, who sadly passed away in February after a long illness).

Professor Freeman worked in the Obama administration, and before that she was closely involved in the Massachusetts vs. EPA court case that eventually led – via a U.S. Supreme Court decision – to EPA’s endangerment finding in the Obama years, which precipitated policy action on climate change under the authority of the Clean Air Act.  You won’t be surprised that she pulls no punches in her comments on the Trump administration’s moves in the environmental realm, nor in her judgments and hopes regarding the Biden administration.  You can hear our complete conversation in the Podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  Jody Freeman very much belongs in this group, as one of the world’s leading authorities on environmental law, a former Federal government official, and a participant in deliberations in private industry.

Jody Freeman has this to say about the previous administration:

“The Trump Administration unraveled, weakened, or rescinded every climate regulation that the Obama Administration had put in place. And they went beyond that to weaken many other environmental rules too. And so, it’s an across-the-board effort to pull environmental protection back as much as possible and weaken the agencies that are responsible for putting rules in place to protect public health and to address climate change.  In environment, climate, energy, it’s really hard to think of a major policy that was left untouched.”

On the other hand, Professor Freeman commends the Biden Administration’s early actions to reverse much of the climate policy damage caused by the previous administration.

“The president signed two sweeping executive orders on climate change within the first month. And they encompass everything you could possibly do with the agencies of the federal government, from how the Treasury Department finances overseas projects to how the Agriculture Department sends money to farmers. The administration is on the hunt for all of the policies that any agency can use to support its clean energy agenda.”

However, looking ahead, she recognizes that the Biden administration probably does not have the necessary votes in the Senate to pass any meaningful legislation placing a price on carbon.  Short of that, she says there are many other actions the administration can take on climate and energy policy.

“Presidents like to use executive branch power. So, you can count on the Biden Administration to be trying to deploy all of the levers, all of the tools that it can use. And they include adopting new rules … for power plant emissions of CO2, adopting new rules for car and truck emissions, adopting sector by sector rules that EPA has the authority to do.  There are other agencies too, like the Department of Energy, which sets appliance efficiency standards. The Department of the Interior regulates extraction of oil and gas on public lands. You’ve already seen them freeze new leases on public lands, and they’re going to favor wind and solar siting on public lands.”

When I ask her about the negative perception of the fossil fuel industry among many climate policy advocates in the United States, Professor Freeman, who sits on the Board of Directors of ConocoPhillips, remarks that there are signs of progress on the horizon.

“I think the industry is in a moment of transition. I do see, for example, the European oil and gas companies are already making pledges and investments in alternative business models.  By no means are we down the road far enough or fast enough, but you can see that they’re starting to think about becoming different kinds of companies over time. And I think the U.S. companies are following suit.”

My complete conversation with Professor Freeman is the 22nd episode in the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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Reflecting on the Causes and Consequences of the Texas Energy Crisis

In mid-February of this year, a series of severe winter storms swept across the United States, due to the jet stream dipping particularly far south, stretching from Washington State to Texas, and running back north along the East Coast, allowing a polar vortex to bring exceptionally cold air across the country, and spawning multiple storms along the jet stream track.  This weather phenomenon resulted in record low temperatures throughout the state of Texas, with temperatures in Dallas, Austin and San Antonio falling below temperatures in Anchorage, Alaska!

            In Texas, this led both to dramatic increases in electricity demand for heating, and – at the same time – drastic reductions in electricity supply, as natural gas, nuclear, and wind generating facilities faced a variety of restrictions.  This severe supply-demand imbalance on the Texas electricity grid resulted in what has already come to be called the “Texas energy crisis of 2021,” which according to my most recent podcast guest, William Hogan, was of “unprecedented” scale, scope, and duration.

            William Hogan is the Raymond Plank Research Professor of Global Energy Policy at the Harvard Kennedy School, where he directs research in the Harvard Electricity Policy Group.  You can hear our complete conversation in the Podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  Bill Hogan surely belongs in this group, as one of the world’s leading authorities on electricity markets, the founding director of Stanford University’s Energy Modeling Forum, and the founding Research Director of the Harvard Electricity Policy Group.

Among the questions I discuss with Bill Hogan in the podcast are these: 

  • There have been previous electricity grid problems and blackouts – in Texas, California, New York – as well as in other parts of the world.  What made this one so different?
  • What were the the supply-side causes, including for generation from natural gas, nuclear, and renewables?  What about the fact that Texas has its own grid, with limited interconnections?  Was that a major problem?
  • On the demand side, if the state’s high reliance on electric heating was part of the problem, what does that say, if anything, about the fact that California and other jurisdictions seem to be moving toward prohibit natural gas connections for new home construction, because of climate change concerns?
  • Was the nature of the Texas electricity market and its regulation (or lack thereof) a significant factor in the crisis?
  • What about the consequences of the Texas crisis, such as the incredibly high electricity prices faced by some of those who were fortunate enough not to lose their power? 

As I noted above, the Texas energy crisis unfolded when a convergence of winter storms produced record-cold temperatures across much of the central part of the United States, reaching as far south as the Lone Star State. The sustained cold caused significant damage to energy infrastructure in Texas, knocking down transmission lines, freezing natural gas pipelines and pumps, severely pinching supplies, and creating blackouts throughout much of the state.  At the same time, the exceptionally cold weather resulted in spiking demand, as electric heating was cranked up by consumers. Hogan describes the scale, scope, and duration of the crisis as “unprecedented,” characterizing it as a one-in-one-hundred-year event.

“It’s a very tragic situation. Terrible. And when you’re dealing with systems like this, you can plan for some things. And then, when you get outside the envelope, you’re in trouble,” he says.

In our conversation, Bill describes how this situation resulted in a severe energy supply/demand imbalance during which hundreds of thousands of homes and businesses were left without power for days, and some of those who remained on the grid were at risk of receiving extremely high electricity bills (because they had previously opted for contracts which passed on wholesale costs plus a relatively small monthly charge).

Some observers have pointed fingers at Texas’ relatively less regulated energy market as the culprit for the crisis that unfolded, but Professor Hogan largely disagrees.

“One of the claims that has been very popular in certain press articles is that Texas has a free market in electricity. And you can’t have a free market in electricity because of problems like this. And that’s a mischaracterization of what has happened in Texas,” he says. “There are differences in the level of choice. But there are also reliability conditions, operating reserves that are imposed, transmission constraints that you have to respect. So, it’s a complicated mix of engineering and economics. And you have more choice, perhaps, in Texas than you have elsewhere. But I think it’s a mistake to characterize it as just having no regulation.”

Hogan agrees that the Texas energy grid is not equipped to withstand such pronounced and sustained cold snaps as the one in February, but he argues that the state’s electricity market design, which is highly responsive to typical changes in supply and demand conditions under normal circumstances, is one that is admired and hence being replicated in other parts of the country.

“You see evidence in the Western energy imbalance market that’s expanding rapidly because of the pressure coming from renewables. And you see the Southeast electricity and energy market proposed a couple of weeks ago, which is trying to accelerate the amount of trading and the amount of market operations. All of these things are moving in the direction of the Texas energy market,” he says. In general, Hogan concludes, the Texas electricity market design isn’t “as broken as people have claimed.”

My complete conversation with Professor Hogan is the 21st episode in the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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