Research

This paper compares the impacts of critical mineral prices and oil prices on an economy in a unified neoclassical growth model. Unlike oil price shocks, which affect the cost of utilizing existing capital (e.g., cars), critical mineral price shocks influence the cost of creating new capital (e.g., electric vehicles) without altering the cost of existing capital. We find that both types of shocks ultimately reduce output and welfare. However, oil-price increases are systematically more contractionary for the economy. Mineral-price increases generate comparatively larger adjustments in investment, capital, and external borrowing but smaller and more gradual losses in output and welfare, and, in capital-rich economies, can slightly raise long-run employment. These results imply that oil-price shocks remain the more serious threat to aggregate activity and welfare, whereas mineral-price shocks call for policies that smooth investment and external-balance-sheet adjustment (e.g., macroprudential tools and precautionary reserves or fiscal buffers).

Regulating methane from the upstream oil and gas sector is seen as a low-cost method to reduce emissions. Yet, there is surprisingly little work studying the economic dynamics of flaring and venting, key sources of these emissions. We analyze data from Alberta, Canada, a jurisdiction that has regulated flaring and venting for more than two decades. We present five lessons for policy-makers. Paramount among these is that flaring and venting are each subject to different regulatory challenges, and thus require distinct regulatory approaches. The key to mitigating flaring is to encourage crude oil extractors to capture associated gases. The key to mitigating venting is to promote the development and adoption of alternative technologies for gas producers. We further estimate the relationship between production and emissions at crude oil batteries, finding elasticities of emissions with respect to production of 0.09 and 0.69 for oil and gas, respectively. While our evidence shows that both flaring and venting can be effectively controlled, regulation may also affect production and result in leakage across release-types and regions. These results inform policy-makers as they create rules to control emissions from upstream oil and gas.

Vehicle electrification is transforming global transportation, driving unprecedented demand for critical minerals like lithium. Ensuring a smooth transition to electric vehicles (EVs) requires a deep understanding of how automaker strategies influence lithium demand and price elasticity over time. This research, informed by semi-structured interviews with major automakers, integrates technical insights on current and emerging battery chemistries into a bottom-up demand model to forecast lithium demand and its price elasticity. We provide an industry-wide assessment of both short- and long-run elasticities by analyzing automaker electrification strategies, regional market segmentation, vehicle class composition, and mixes of existing and emerging battery chemistries. We find that short-run lithium price elasticity increases with greater optionality in EV technology, while long-run elasticity initially rises before declining as the market matures. These insights offer valuable guidance for industry and policymakers seeking to design electrification strategies that mitigate risks associated with lithium price volatility.

Many recent US Congresses have proposed bills that allow state and local governments to restrict interjurisdictional waste shipments. Using data on intercounty waste flows in California and a random utility model of haulers’ decisions about where to deposit waste from each county, this paper studies the economic costs of import bans and import taxes and the implications on the distribution of waste disposal by race (and ethnicity). I find NIMBY-motivated laws would reduce intercounty waste transport at substantial economic costs. Furthermore, a NIMBY law enacted in a county, despite reducing the county’s imports, could increase total intercounty waste in the whole state, generating additional external costs of transportation. A universal import ban in all counties would reduce transboundary waste but it would lead to substitution of waste away from facilities near white residents and toward facilities near Hispanic residents, exacerbating distributional concerns.

Recent empirical analyses show consumers in electricity and water markets respond to average price rather than marginal price, calling for information provision policies that help correct the consumers' bias. This paper characterizes the regulated tariff if the regulator is informed about the average-price response of consumers. I find the regulated tariff for biased consumers promotes equity gains by featuring quantity premia and providing access to utility consumption for a larger population than in the world of rational consumers. The world of biased consumers may also yield higher total welfare. These results bring up the opportunity costs of the information provision programs that help consumers correct the bias.

We model a spectrum auction where firms purchase units to participate in a constrained, multi-product, downstream market. We use dynamic programming techniques to numerically solve for the optimal bidding strategy in a clock auction. Firms value constraining competitor market power, so incumbents often bid aggressively to shut out entrants. We find that high cost firms may hold up the market, so the auction may be inefficient and generate zero revenue. An auction may be optimal for a regulator maximising total surplus. A regulator maximising auction revenue sets reserve prices high enough to restrict spectra sold, effectively behaving as a monopolist.