U S Energy & Climate Roadmap

The Energy Policy Institute at the University of Chicago (EPIC) USEnergy&ClimateRoadmap produces data-driven research that advances society’s USEnergy& understanding of the global energy challenge: ensuring that markets supply the energy needed for human development ClimateRoadmap without risking human health or climate change. It translates research insights into real-world impacts through strategic Evidence-based Policies for Eff ective Action outreach and training for the next generation of global energy leaders. With support from Saieh Hall for Economics 5757 S. University Avenue The Kenneth C. Grin Chicago IL 60637 Applied Economics Incubator Online epic.uchicago.edu On Twitter @UChiEnergy On Facebook www.facebook.com/uchicagoenergy/ EPIC produces data-driven research that advances society’s U.S.understanding Energy of the global energy & challenge and translates research insights into real-world impacts through strategic outreach and Climatetraining for the next generation Roadmap of global energy leaders. Evidence-based Policies for Effective Action Confronting the Global Energy Challenge The Climate Impact Lab is a fi rst-of-its-kind, Energy powers the modern world, fueling innovation multidisciplinary eff ort working to measure the real-world and improving people’s lives. But humanity’s energy costs of climate change at a local level. It is also developing usage is also generating levels of pollution that are the world’s fi rst empirically-derived estimate of the global substantially shortening people’s lives and causing social cost of carbon, which can be used by governments disruptive climate change. Finding a way to supply the around the world to set climate policy. energy needed for human development without risking The Air Quality Life Index (AQLI) is an air quality metric health or the environment is one of the most important that converts particulate air pollution measurements challenges the world faces: the global energy challenge. into perhaps the most important factor that exists—their EPIC is taking on this challenge by uncovering the impact on life expectancy. The Index allows users to zoom true costs of the world’s energy choices through data- in on any district in the world to see the eff ects of that driven research. EPIC converts this research into real- district’s air pollution levels on residents’ lifespans. world action through targeted outreach, ensuring that policymakers, businesses, and members of the public Because the global energy challenge is especially have the information they need to understand the eff ect pressing for large, rapidly growing countries, EPIC also of their choices on the energy system, and to help them has teams on the ground in India and China. The teams make better ones. EPIC also plays a vital role in training at EPIC-India and EPIC-China work hand-in-hand the next generation of global leaders to think critically and with government and industry partners to devise and comprehensively about energy issues and to recognize experimentally test potential solutions to pressing and develop solutions that work. energy and environmental challenges. Through these innovative partnerships and projects, research insights can lead to lasting policy change. Data-Driven Research for Lasting Impact EPIC acts as an interdisciplinary hub for energy Learn more at EPIC.uchicago.edu and environmental research across the University of Chicago. Combining the insights of economists, policy analysts and business experts with the technical expertise of engineers and scientists, EPIC’s faculty affi liates work together to bring robust, cross-cutting research to the forefront of the global energy debate. In addition to faculty research, EPIC has developed © 2021 Energy Policy Institute at the University of Chicago (EPIC) several affi liated centers that target critical aspects of Saieh Hall for Economics · 5757 S. University Avenue · Chicago IL 60637 the global energy challenge. Online epic.uchicago.edu On Twitter @UChiEnergy On Facebook www.facebook.com/uchicagoenergy/ Cover Photograph ©Sam Kittner/ kittner.com Table of Contents 4 Introduction 76 Sector-by-Sector Approaches 78 Decarbonizing the U.S. Economy with a National Grid Steve Cicala, Assistant Professor of Economics, Tufts University; 10 Effects & Costs of Climate Change Non-Resident Scholar, EPIC 12 Climate Change and the U.S. Economic Future 88 Fueling Technology Deployment with a Clean Electricity Standard Amir Jina, Assistant Professor, Harris School of Public Policy Michael Greenstone, Milton Friedman Distinguished Service Professor in Economics; Director, EPIC; Director, Becker Friedman Institute 20 Updating the United States Government’s Social Cost of Carbon Ishan Nath, Postdoctoral Scholar, EPIC Tamma Carleton, Assistant Professor, Bren School of Environmental Science & Management, University of California, Santa Barbara 100 Restoring the Future of Nuclear Energy Michael Greenstone, Milton Friedman Distinguished Service Professor Robert Rosner, William E. Wrather Distinguished Service Professor in the departments in Economics; Director, EPIC; Director, Becker Friedman Institute of Astronomy & Astrophysics and Physics; Founding Co-Director, EPIC Rebecca Lordan-Perret, Postdoctoral Scholar, University of Basel, Switzerland 48 Economy-wide Approaches 110 Making Energy Efficiency Work Fiona Burlig, Assistant Professor, Harris School of Public Policy 50 Put a Price on It: The How and Why of Pricing Carbon Michael Greenstone, Milton Friedman Distinguished Service Professor 122 Four Proposals to Improve Fuel Economy Standards in Economics; Director, EPIC; Director, Becker Friedman Institute Koichiro Ito, Associate Professor, Harris School of Public Policy Ishan Nath, Postdoctoral Scholar, EPIC 134 Accelerating and Smoothing the Transition from Coal 64 A Solution to the Leakage Problem Mark Templeton, Clinical Professor of Law, University of Chicago Law School; David Weisbach, Walter J. Blum Professor of Law, University of Chicago Law School Director, Abrams Environmental Law Clinic Samuel Kortum, James Burrows Moffatt Professor of Economics, Yale University 148 Ensuring Americans Receive Fair Value for U.S. Oil and Gas Resources Thomas Covert, Assistant Professor, Booth School of Business Ryan Kellogg, Professor and Deputy Dean for Academic Programs, Harris School of Public Policy 2 U.S. ENERGY & CLIMATE ROADMAP EPIC.UCHICAGO.EDU U.S. ENERGY & CLIMATE ROADMAP 3 The United States, like all countries around the world, generation has grown steadily,2 supplying record levels will navigate these three common challenges through of power in 2019, it still meets just 11 percent of U.S. the prism of its own particular history, values, and vision energy needs.3 Policymakers will need to find a way to for the future. Increasingly, that includes an emphasis on sustain the economic benefits that abundant fossil energy addressing the significant, persistent racial and income has provided while speeding the transition to more disparities in exposure to environmental pollution with sustainable power sources. their roots in segregationist policies from the Jim Crow For the millions of Americans who were brought up south to the South Side of Chicago. The path to addressing during an era of untrammeled fossil fuel consumption, the the Global Energy Challenge, and to addressing these benefits of the transition to cleaner energy sources will be long-standing inequities, runs through public policy. As all too familiar. In the 1950s and 1960s, thick smog often the Biden administration and a new Congress take the blanketed U.S. cities. Power plants and factories emitted reins in Washington, the policy choices they make could pollutants into the air with little or no regulation, while not be more important. cars ran on fuel that left a wake of soot and airborne lead The American people will be best served by having these behind them. Since the 1970 Clean Air Act was passed, air U.S. ENERGY & CLIMATE ROADMAP choices guided by the public interest and informed pollution in Los Angeles has fallen by nearly 60 percent, by the latest insights from economic, scientific, and extending average life expectancy in that city by more than public policy research. This book, a compilation of a year, according to the Air Quality Life Index,4 a measure Introduction policy recommendations from affiliated scholars of of the life expectancy impacts of long-term exposure to air the Energy Policy Institute at the University of Chicago pollution. In Philadelphia and Washington, DC, the effect Inexpensive, reliable energy, largely sourced from fossil fuels, (EPIC) is designed to help policymakers identify and of pollution reductions was even more significant, adding has driven U.S. economic growth and prosperity for more than implement practical policies to address the greatest nearly three years to average life expectancy.5 challenge the country now faces. Each chapter is Yet, too many people continue to suffer from local a century. These gains have come with costs, however. Local grounded in empirical research that has been galvanized pollution; research has demonstrated that predominantly by robust academic debate and channeled into practical environmental pollution causes people to lead sicker, shorter Black and Hispanic communities face much higher policy applications through discussion with EPIC’s rates of exposure to pollution, and exhibit higher rates lives. Climate change, once thought to be a distant threat, policy experts, rather than being developed only in of asthma,

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