Tuesday, April 25, 2017

Dow Chemical and the EPA

Meant to post this last week, but I thought this article was interesting and timely given what we've been talking about. The media can definitely have an influence over our perception of companies!


Thursday, April 13, 2017

Lessons from U.S. Acid Rain Program on Cap-and-Trade

In our research about the US Acid Rain program, we've encounter overall lauding of its positive results (including low transaction cost, spurring of innovation) and have come to believe that the cap-and-trade mechanism is overall beneficial.  The framework encourages stakeholders across the spectrum to get involved.  Its flexible design (vs. uniform regulation) creates a point of entry for all who are invested in the energy infrastructure to proactively take ownership of the environmental crisis.  A little known fact about the program is that the general public can bid on and buy allowances if they wanted to 'retire' this emission.

We acknowledge some valid and strong critiques, which point to problematic incentive structure and moral hazard implications (higher allowances given to high polluters, 'distraction' from potentially more beneficial programs, etc.).  However, we don't believe these issues should automatically rule out cap-and-trade as a viable tool in environmental policy-making.  What should be done is to apply lessons from such critiques in the continuing improvement of all future programs.

As environmental leaders, we must balance the multiple pillars of sustainability as well as reduce unintended and potentially damaging shocks to the system.  Cap-and-trade serves as a reasonable and positive transition mechanism that is rooted in the reality of our current national infrastructure, which as a matter of feasibility, simply takes time to change.  (Capital projects for a power plant can take decades to complete.)  As shown in the US Acid Rain program, this market-based mechanism can reach success in reducing emissions of pollution, attaining compliance and cooperation from the industry. Moreover, a few positive side effects have been noted, including the allowance prices making transparent industry's measure of marginal cost of abatement--an empowering piece of information not formerly available.

Ultimately, we believe the key is continual critical analysis and improvement—not to approach this (or any program) as a permanent panacea nor to rest on the laurels of its success.  Indeed, the US Acid Rain program addresses just one of the myriad of objectives in a complex, systemic and global problem.  In fact, with recent auctions of SO2 allowances resulting in $0.06 per ton spot prices, we see an economic case to further restrict supply of emission allowances—surely a win-win for economics and environment…?  And opportunity to use lessons over the last 22 years to design even more effective mechanisms (including allowance markets) for other environmental objectives.

-Andrew and Lisa

Trump wants to cut information programs promoting investments in energy efficiency that are shown to be effective

Our recent article published with Omar Asensio in Nature Energy and reported in the Washington Post shows that voluntary information programs can be effective to save energy. But Trump wants to cut these programs....Why?

Energy supplied to buildings represents about a third of total US energy consumption. Voluntary information programs — like certification labels — have been introduced in many nations to encourage investment in energy efficiency measures. These voluntary approaches aim to reduce energy consumption, and therefore carbon emissions, through market mechanisms. 

Three such approaches in the US are the Department of Energy’s Better Buildings Challenge, the Environmental Protection Agency’s Energy Star program, and the Green Building Council’s Leadership in Energy and Environmental Design (LEED) program.

Our research, based on 178,777 commercial buildings in Los Angeles, shows these information programs designed to promote energy efficiency have led to energy savings of up to 30%. This corresponds to a reduction of 210 million kilowatt-hours (kWh) or 145 kilotons of carbon dioxide equivalent (CO2e) emissions per year.

So why cut programs that work and are cost-effective?

Magali Delmas

Monday, April 3, 2017

Welcome to the MGMT246A class of Spring 2017!!!

This is the Blog for the class MGMT246A Business and Environment at UCLA Anderson School of Management.

Here, students can share their thoughts, opinions, and ideas about the weekly theme of the class. Students must follow the instructions for posting found on the class Syllabus.

This is a safe learning environment and we adhere to UCLA's Student Code of Conduct.

Economy is thriving and emissions are down in California, but emissions from transportation are up and still the best opportunity for improvement

California is heading in the right direction , but transportation emissions buck the trend. Critics of California's environmental poli...