MIT Sloan Prof. Christopher Knittel

From USA Today

In his State of the Union, President Obama set a goal to “cut in half the energy wasted by our homes and businesses over the next 20 years.”

Many Americans get nervous when we hear the government wants to step into our homes. We think we make prudent choices without conferring with Uncle Sam. We shop sales. We clip coupons. We refinance our mortgages. So is the president right? Do we systematically waste energy? And if so, can he help us save? Read More »

MIT Sloan Prof. Christopher Knittel

From Huffington Post

The long drought will have real consequences for the nation’s food and energy markets. But it also creates an opportunity for Washington to take a hard look at the Bush-era mandate known as the Renewable Fuels Standard (RFS), which requires that 10 percent of the gasoline we put in our cars be comprised of ethanol, most of which is made from corn.

Because both sides in the debate over the standard tend to exaggerate, we conducted extensive research into the issue. We conclude that the ethanol mandate has some significant negative consequences and few redeeming features. Even without a drought, the policy is inefficient; with a drought it is much worse. Two economic myths drive support for the ethanol mandate. Read More »

MIT Sloan Prof. Christopher Knittel

A few years ago, I was a bit skeptical when I heard some of the claims being made by supporters of the ethanol industry about how that corn-based fuel was reducing the price of gasoline. But it was only when I took a trip to Washington with my son and I saw some ads that were making even bigger claims that I decided that the truth had to get out.

Right now, Congress is debating the nation’s renewable fuel standard which, among other things, has helped spur a sharp increase in the production of ethanol. To help make their case, the trade group for the U.S. ethanol industry has been citing studies that claim that ethanol production reduced gasoline prices by 89 cents in 2010 and by $1.09 in 2011. Pretty powerful stuff. Except it’s wrong.

A paper I just co-authored for the MIT Center for Energy and Environmental Policy Research finds that the models used to produce those claims are “driven by implausible economic assumptions and spurious statistical correlations.” In fact, we find that the effects of ethanol production on gas prices are near zero and statistically insignificant. Read More »

MIT Sloan Prof. Christopher Knittel

My latest paper* looks at the various ways in which we could reduce petroleum consumption in the U.S. The paper looks at the most prominent policies aimed at that end: providing more federal subsidies for hybrid and electric cars, compelling car manufacturers to increase the fuel economy of new vehicles coming off the assembly line, and raising the production of biofuels, such as ethanol and methanol.

The paper comes to an unsatisfying conclusion: the policies we have in place are not doing much at all to reduce our gas consumption. They are expensive both in terms of the technology they require and the social costs they incur. Read More »