Submitted by Rupak Thapaliya on Tue, 2014-11-18 15:13
The United States is currently one of the many countries across the globe which continues to work towards implementing mechanisms focused on mitigating anthropogenic carbon emissions. In the U.S., markets and the market-like instruments which are employed within them, known most commonly as carbon offsets and renewable energy certificates (RECs), are the tools which encourage the development of renewable energy and reduce carbon emissions. These market-based incentives have the potential to significantly endorse or impede hydropower, dependent upon the potential interaction of science and politics.The implications of the voluntary and compliance markets on alternative and renewable energy affect both the future development of power plants, as well as the management of existing facilities. Case studies demonstrating the financial impacts of these markets on hydropower projects are presented, which highlight the regulatory requirements in place for hydropower and other renewable power plants. The paper concludes with a discussion of what the future may hold for the environmental commodities markets and the role of the hydropower industry within them.
We conduct a benefit-cost analysis of a relicensing agreement for two hydroelectric dams in Michigan. The agreement changed daily conditions from peaking to run-of-river flows. We consider three categories of costs and benefits: producer costs of adapting electricity production to the new time profile of hydroelectric output; benefitsof reductions in air pollution and greenhouse gas emissions; and benefits of improved recreational fishing. The best estimates suggest that the aggregate benefits are more than twice as large as the producer costs. The conceptual and empirical methods provide a template for investigating the effects of an environmental constraint on hydroelectric dams. (JEL Q43, Q57)
This report is intended to help Fish and Wildlife Service (FWS) staff become more effective participants in the hydropower relicensing process through a better understanding of the economic analysis used to evaluate hydropower projects. Specifically, the report seeks to accomplish the following goals:
- Explain the Federal Energy Regulatory Commission's (FERC's) current approach to the economic analysis of relicensing alternatives;
- Review potential methodological refinements and why they are important; and
- Introduce a variety of approaches for assessing non-power values, helping FWS staff recognize when more advanced analyses are applicable.
The purpose of this document is not to provide a step-by-step guide for the conduct of primary economic analysis, i.e., the reader is not expected to become an expert in the implementation of the analyses described here. Rather, the document seeks to attune non-experts to the role of economics in relicensing and the diversity of techniques available.
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