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Environmentally damaging electricity trade

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Author Info

  • Billette de Villemeur, Etienne
  • Pineau, Pierre-Olivier

Abstract

Electricity trade across regions is often considered welfare enhancing. We show in this paper that this should be reconsidered if environmental externalities are taken into account. We consider two cases where trade is beneficial, before accounting for environmental damages: first, when two regions with the same technology display some demand heterogeneity; second when one region endowed with hydropower arbitrages with its "thermal" neighbor. Our results show that under reasonable demand and supply elasticities, trade comes with an additional environmental cost. This calls for integrating environmental externalities into market reforms when redesigning the electricity sector. Two North American applications illustrate our results: trade between Pennsylvania and New York, and trade between hydro-rich Quebec and New York.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 3 (March)
Pages: 1548-1558

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Handle: RePEc:eee:enepol:v:38:y:2010:i:3:p:1548-1558

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Web page: http://www.elsevier.com/locate/enpol

Related research

Keywords: Electricity trade Hydropower Greenhouse gas emissions;

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References

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  1. Pineau, Pierre-Olivier & Hira, Anil & Froschauer, Karl, 2004. "Measuring international electricity integration: a comparative study of the power systems under the Nordic Council, MERCOSUR, and NAFTA," Energy Policy, Elsevier, vol. 32(13), pages 1457-1475, September.
  2. Pineau, Pierre-Olivier, 2008. "Electricity sector integration in West Africa," Energy Policy, Elsevier, vol. 36(1), pages 210-223, January.
  3. Jean-Thomas Bernard & Frédéric Clavet & Jean-Cléophas Ondo, 2004. "Electricity Production and CO2 Emission Reduction: Dancing to a Different Tune Across the Canada-US Border," Canadian Public Policy, University of Toronto Press, vol. 30(4), pages 401-426, December.
  4. DeCicco, John M. & Bernow, Stephen S. & Beyea, Jan, 1992. "Environmental concerns regarding electric power transmission in North America," Energy Policy, Elsevier, vol. 20(1), pages 30-39, January.
  5. Crampes, Claude & Moreaux, Michel, 2001. "Water Resource and Power Generation," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  6. Dahl, Carol A., 1993. "A survey of energy demand elasticities in support of the development of the NEMS," MPRA Paper 13962, University Library of Munich, Germany.
  7. Etienne BILLETTE DE VILLEMEUR & Annalisa VINELLA, 2008. "Water Misallocation and Environmental Externalities in Electricity Generation," RSCAS Working Papers 2008/27, European University Institute.
  8. Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
  9. Rangel, Luiz Fernando, 2008. "Competition policy and regulation in hydro-dominated electricity markets," Energy Policy, Elsevier, vol. 36(4), pages 1292-1302, April.
  10. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470.
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Cited by:
  1. de Villemeur, Étienne & Vinella, Annalisa, 2010. "Long-term contracting in hydro-thermal electricity generation: welfare and environmental impact," TSE Working Papers 10-182, Toulouse School of Economics (TSE).
  2. Billette de Villemeur, Etienne & Pineau, Pierre-Olivier, 2012. "Regulation and electricity market integration: When trade introduces inefficiencies," MPRA Paper 41251, University Library of Munich, Germany.

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