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The roles of energy markets and environmental regulation in reducing coal‐fired plant profits and electricity sector emissions

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  • Joshua Linn
  • Kristen McCormack

Abstract

Between 2005 and 2015, US electricity sector emissions of nitrogen oxides and sulfur dioxide, which harm human health and the environment, declined by two thirds, and many coal‐fired power plants became unprofitable and retired. Intense public controversy has focused on these changes, but the literature has not identified their underlying causes. Using a new electricity sector model of the US eastern interconnection that accurately reproduces unit operation, emissions, and retirement, we find that electricity consumption and natural gas prices account for nearly all the coal plant profitability declines and resulting retirements. Environmental regulations had little effect on these outcomes.

Suggested Citation

  • Joshua Linn & Kristen McCormack, 2019. "The roles of energy markets and environmental regulation in reducing coal‐fired plant profits and electricity sector emissions," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 733-767, December.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:4:p:733-767
    DOI: 10.1111/1756-2171.12294
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    Cited by:

    1. Andong Liu & Xuesong Gu, 2020. "Environmental Regulation, Technological Progress and Corporate Profit: Empirical Research Based on the Threshold Panel Regression," Sustainability, MDPI, vol. 12(4), pages 1-15, February.
    2. Abrell, Jan & Kosch, Mirjam & Rausch, Sebastian, 2022. "How effective is carbon pricing?—A machine learning approach to policy evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    3. Joshua Blonz & Brigitte Roth Tran & Erin Troland, 2023. "The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels," Working Paper Series 2023-09, Federal Reserve Bank of San Francisco.
    4. Dmitry A. Ruban & Natalia N. Yashalova & Vladimir A. Ermolaev, 2021. "Is Environment a Strategic Priority of the Leading Energy Companies? Evidence from Mission Statements," Sustainability, MDPI, vol. 13(4), pages 1-18, February.
    5. Kacker, Kanishka & Lange, Ian, 2022. "Inter-regional coal mine competition in the US: Evidence from rail restrictions," Energy Economics, Elsevier, vol. 110(C).
    6. Linn, Joshua & Holt, Christopher, 2023. "Targeted Regulation for Reducing High-Ozone Events," RFF Working Paper Series 23-02, Resources for the Future.
    7. Rebecca J. Davis & J. Scott Holladay & Charles Sims, 2022. "Coal-Fired Power Plant Retirements in the United States," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 3(1), pages 4-36.
    8. Raff, Zach & Meyer, Andrew & Walter, Jason M., 2022. "Political differences in air pollution abatement under the Clean Air Act," Journal of Public Economics, Elsevier, vol. 212(C).

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