Treich, N. & Yang, Y. (2021) Public safety under imperfect taxation. Journal of Environmental Economics and Management 106,102421.

Yang, Y. (2022) Electricity Interconnection with Intermittent Renewables. Journal of Environmental Economics and Management 113, 102653.

Working Papers

Climate Policy and Electricity Trade (with Stefan Ambec)

The lack of coordinated international climate policies raises leakage concerns in the design of energy transition policies. We investigate the optimal unilateral carbon policy design for electricity trade with intermittent renewable energy. We consider policy instruments including carbon tax, border adjustment tax, and renewable subsidies. In turn, we analyze the effect of such policies on market equilibrium prices, renewable investment, and global emissions. Using a two-country model of electricity trade, we characterize the conditions under which different combinations of policy instruments implement the optimal energy mix. We find that with a unilateral carbon tax, the border adjustment tax turns out to be effective only when renewables are producing. Moreover, renewables must be subsidized to be exported, in which case carbon emissions should be taxed more than the Pigouvian level to avoid excessive consumption.

A Framework of Power System Resilience with Economic Impact (with Janie Chermak)

The prevalence of intermittent renewable energy, extreme weather events, and distributed energy resources has prompted increasing discussion on power system resilience. However, the literature has yet reached a consensus on the resilience metric. We propose in this paper an economic-impact-weighted resilience metric to capture the socio-economic loss of power system interruptions. We describe the structure of the metric and show numerically how the metric can be used to evaluate system resilience and optimal system resilience planning.

Benefit-cost analysis of technology-based sulfur hexafluoride mitigation in the power sector (with Song Xiao, Yubei Li, Jingtong Lin, Yana Jin)

Sulfur Hexafluoride (SF6), the most potent greenhouse gas, is widely used in gas-insulated switchgear (GIS) equipment in the power industry. With the growing electrification and integration of renewable energy into the grid, GIS installations and SF6 emissions are projected to rise. This paper is the first systematic analysis of the economic feasibility of replacing SF6 in high-voltage GIS equipment. We construct a flexible and scalable benefit-cost analysis framework to evaluate the net social benefit of technically feasible SF6 replacement schemes. Using the Chinese power industry data, we find that whether replacing the use of SF6 generates a positive social benefit critically depends on the level of the social cost of carbon and firms’ compliance to existing SF6 industry standards. Moreover, there can be high spatial variation in the net benefit level. However, investing in eco-friendly substitute of SF6 is highly cost-effective to reduce greenhouse gas emissions compared to other green technologies such as wind power and solar PV.