Another argument for carbon tax: how car buyers behave – Christopher Knittel

MIT Sloan Professor Christopher Knittel

From The Sacramento Bee

Do you rationalize splurging on your daily latte by bringing your lunch to work? Every day we make decisions like this that impact our diet and pocketbook. These same trade-offs also affect the types of cars we drive, which impacts the effectiveness of fuel-efficiency policies.

In a recent study based on five years of data from the California Department of Motor Vehicles, James Archsmith and David Rapson of University of California, Davis, Ken Gillingham of Yale University and I found that in two-car households, increasing the fuel economy of the first car encourages owners to demand less fuel economy in their second car. In other words, if you buy a Toyota Prius, you may be more likely to replace your second car with an SUV.

When households increase the fuel economy of their first car by 10 percent, they will reduce the fuel efficiency of the second vehicle by 5 percent, our analysis found. The result is that half the fuel economy gained from improving the first car is eaten away by a less fuel-efficient second car.

But that is only part of the story. It turns out that owners also ended up driving more total miles, which cuts fuel savings another 10 percentage points. In the end, 60 percent of the benefits of increasing the fuel economy of the first car disappear when the second car is replaced with a less efficient vehicle. Read More »

“The Future of American Innovation”– a podcast with David Schmittlein

MIT Sloan Dean David Schmittlein

MIT Sloan Dean David Schmittlein

MIT Sloan’s David Schmittlein appeared on CEO Global Foresight to discuss how the United States is leading world innovation in life sciences, information technology, and energy.

The segment was recently made available as an 8-minute podcast on the Innovation Gamechangers podcast, available on iTunes.

Dean Schmittlein also discusses innovation clusters and how the MIT community encourages a culture of collaboration and action learning. The program also includes interviews DARPA director Arati Prabhakar and Carl Dietrich, an MIT alumnus and CEO of flying car company Terrafugia.

Listen to Innovation Gamechangers podcast, available on iTunes.

David Schmittlein is the John C Head III Dean and Professor of Marketing at the MIT Sloan School of Management.

Maine can be a leader in solar energy, but rooftop by rooftop isn’t how it will happen – Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From The Bangor Daily News

Renewable forms of energy, especially solar, have shown strong growth in recent years in the U.S., and that is certainly a positive development. As policymakers across the country continue to encourage this growth, it is important that they take a close look at the policies in place that provide favorable incentives to the solar industry. Currently, Maine has an opportunity to be among a select group of leaders on this front, as the state’s regulators work toward refining policies around solar energy.

Specifically, the proposal put forth by the Maine Public Utility Commission to reform net energy billing and ultimately transition to a more market-based approach for pricing solar energy production is a great example of how we should be thinking about these policies. Here’s what our key consideration should be: What is the most effective and efficient way to grow renewable energy production?

One of the main answers here is that while distributed solar energy can benefit homeowners and communities, it is not nearly the most technically or economically efficient way to achieve the goal of reducing greenhouse gas emissions. Ultimately, large scale solar is much more effective, and it will do more to help keep Maine’s electricity rates among the lowest in the region.

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Technology vs. location: Why U.S. shale oil & gas forecasts could be over-estimated – Francis O’Sullivan

MIT Sloan Sr. Lecturer Francis O’Sullivan

From The Energy Collective

Over the last five years, Americans have enjoyed consistently low oil and gas prices thanks to a massive uptick in the production of oil and gas produced from shale in the U.S. This industry growth has enabled the country to play an increasingly important role in global and domestic energy markets. But how long will these low prices and high productivity levels last? The answer is of great importance for matters like the economy and national security – not to mention the price you pay for gas.

If you look at our current production levels, you might think the good times will last for quite a while. The U.S. is now considered by some to be the world’s “swing producer” of shale oil and gas. In North Dakota’s Williston tight oil basin, crude oil production grew from 98,000 barrels a day in 2005 to 1,174,000 barrels a day in 2015. As a result, the U.S. power sector has drastically increased its reliance on domestically produced natural gas, especially from shale.

A lot of credit for this industry growth is going to technology. Many people say that the technology used to get the resources out of the rock – and the subsequent technology developments – are to thank for the gains we’ve seen in well productivity. But how much can we really link to technology versus the location of the wells?

Looking at this question in a recent study, we found that the oil and gas business is just like real estate. It’s all about location, location, location. Where you drill matters, but in the shale business it matters even more.

We looked at data from the Williston Basin during a 42-month period starting in 2012 to quantify the extent to which improvements in well productivity have been associated with technology as opposed to changes in development location. Using five different regression models, we found that the impact on technology on well productivity is greatly over-estimated. In fact, our study showed that the portion of improvement that came from technology is over-estimated by about 50%. This means that a great deal of the time, the operator was just drilling in the right spots.

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The future of energy in Latin America — Lee Ullmann

Lee Ullmann, Director of the MIT Sloan Latin America Office Office of International Programs

Lee Ullmann, Director of the MIT Sloan Latin America Office
Office of International Programs

Approximately 34 million people in Latin America and the Caribbean don’t have electricity in their homes and 75% of the regional energy matrix relies on nonrenewable sources of energy, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). However, increasing access to energy and increasing renewable energies and efficiency are critical for sustainable development. In recognition of this major need, the United Nations has made it a goal to make sustainable energy for everyone a reality by 2030 in its Sustainable Energy for All (SE4ALL) global initiative. Read More »