On Aug. 8, 2005, President Bush signed the Energy Policy Act of 2005 (PL 109-58). This was the first major piece of energy legislation enacted since 1992 following five years of Congressional efforts to pass energy legislation. Among other things, the law contains tax incentives worth over $14 billion between 2005 and 2015. These incentives represent both pre-existing initiatives that the law extends as well as new initiatives.
      In this paper I survey federal tax energy policy focusing both on programs that affect energy supply and demand. I briefly discuss the distributional and incentive impacts of many of these incentives. In particular, I make a rough calculation of the impact of tax incentives for domestic oil production on world oil supply and prices and find that the incentives for domestic production have negligible impact on world supply or prices despite the United States being the third largest oil producing country in the world.
      Finally, I present results from a model of electricity pricing to assess the impact of the federal tax incentives directed at electricity generation. I find that nuclear power and renewable electricity sources benefit substantially from accelerated depreciation and that the production and investment tax credits make clean coal technologies cost competitive with pulverized coal and wind and biomass cost competitive with natural gas.

This dissertation consists of three self-contained essays, each of which examines part of the causal link among inward/outward foreign direct investment (FDI), intra-organizational proximity, and in-house technology development performances.

The first essay explores why international joint ventures (IJVs)—an FDI-hosting arrangement often employed by the global South to strengthen foreign investors’ commitment to local economic development—may lead to only partial success in nurturing local technological capability. The experience of China’s passenger vehicle sector demonstrates that, in the existence of a substantial technological-capability gap between alliance partners, the IJV arrangement is likely to create a “passive” learning mode where foreign firms determine what, when, and how their local IJV partner firms should learn. Accordingly, learners using this IJV arrangement may be able to strengthen their production capability, where interests of both IJV partner firms often converge, but it leaves their project-execution and innovation capabilities largely undeveloped.

The second essay discusses how outward FDI can complement the IJV-based technological capability-building process, through an analysis of the Shanghai Automotive Industry Corporation (SAIC) case. When a firm is upgrading its technological capability, outward FDI can allow learners to have access to human-embedded skills and knowledge and other intellectual assets that are hardly accessible through the inward globalization strategy. Access to a wide range of external resources is a critical ingredient for improving technological capability, and it can also promote self-learning capability by encouraging subsequent learning-by-doing practices. Accordingly, outward FDI can augment “active” nature in the “passive” learning mode created by the inward globalization strategy.

The last essay examines why intra-organizational proximity matters for the technological catchup process, through a comparison of the Chinese Big Three automotive groups. As a firm’s asset-seeking inward/outward globalization strategy and domestic mergers are accompanied by substantial growth in their organizations and assets, intra-firm governance affects the internalization outcome of the acquired assets. The comparative analysis demonstrates that SAIC surpasses the First Automotive Works and the Dongfeng Motor Group in terms of in-house technology development partly because the former has managed its corporate growth within a tight geographical and relational space, compared to the latter. Intra-organizational proximity contributed to SAIC’s technological capability-building process by encouraging the sharing and integration of acquired resources across sub-operational units, thus creating group-wide synergy for the effective internalization of the resources.

NOTE: Only the abstract and introductory portion of the dissertation is provided in the PDF file linked below. For the complete dissertation manuscript, please contact the author at kmnam [at] mit.edu.

This paper assesses the role of uncertainty over future U.S. carbon regulations in shaping the current choice of which type of power plant to build. The pulverized coal technology (PC) still offer the lowest cost power—assuming there is no need to control emissions of carbon. The integrated coal gasification combined cycle technology (IGCC) may be cheaper if carbon must be captured. Since a plant built now will be operated for many years, and since carbon regulations may be instituted in the future, a U.S. electric utility must make the current investment decision in light of the uncertain future regulatory rules. This paper shows how this decision is to be made. We start by describing the economics of the two key coal-fired power plant technologies, PC and IGCC. We then analyze the potential costs of future carbon regulations, including the costs of retrofitting the plant with carbon capture technology and the potential cost of paying charges for emissions. We present the economics of each design in the form of a cash flow spreadsheet yielding the present value cost, and show the results for different scenarios of emissions regulation. We then discuss how to incorporate uncertainty about the future regulation of carbon emissions into the decision to build one plant design or the other. As an aid to decision making, we provide some useful benchmarks for possible future regulation and show how these benchmarks relate back to the relative costs of the two technologies and the optimal choice for the power plant investment. Few of the scenarios widely referenced in the public discussion warrant the choice of the IGCC technology. Instead, the PC technology remains the least costly. The level of future regulation required to justify a current investment in the IGCC technology appears to be very aggressive, if not out of the question. However, the current price placed on carbon emissions in the European Trading System, is higher than these benchmarks. If it is any guide to possible future penalties for emissions in the U.S., then current investment in the IGCC technology is warranted.

The transportation sector in the United States is a major contributor to global energy consumption and carbon dioxide emission. To assess the future potentials of different technologies in addressing these two issues, we used a family of simulation programs to predict fuel consumption for passenger cars in 2002. The selected technology combinations that have good market potential and could be in mass production include: advanced gasoline and diesel internal combustion engine vehicles with automatically shifting clutched transmissions, gasoline, diesel, and compressed natural gas hybrid electric vehicles with continuously variable transmissions, direct hydrogen, gasoline and methanol reformer fuel cell hybrid electric vehicles with direct ratio drive, and battery electric vehicle with direct ratio drive. Using appropriately researched assumptions and input variables, calculations were performed to estimate the energy consumption and carbon dioxide emissions of the different technology combinations. Comparing the results for the vehicle driving cycle only, an evolutionary fuel consumption improvement of about 35 percent can be expected for the baseline gasoline car, given only market pressures and gradual regulatory requirements. With more research and investment in technology, an advanced gasoline engine car may further reduce fuel consumption by 12%, and a gasoline electric hybrid by 40%, as compared to the evolutionary car. Diesel versions of the advanced combustion and hybrid vehicles may be 10-15% better than their gasoline counterparts. Compressed natural gas hybrid vehicle may reduce fuel consumption by 3-4% but may reduce carbon dioxide emission by 25%. Meanwhile, a direct hydrogen fuel cell electric hybrid vehicle may have the greatest improvement over the baseline at 55%, but the gasoline and methanol reformers fuel cell versions appear very expensive and offer little benefit. Finally, aside from critical battery limitations, the electric vehicle is difficult to compare to other vehicles without taking into account the electricity generation process.

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