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Natural gas prices, electric generation investment, and greenhouse gas emissions

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  • Brehm, Paul

Abstract

Between 2007 and 2013 the natural gas price dramatically declined, in large part due to hydraulic fracturing. These lower natural gas prices induced switching from coal generation to natural gas generation. I find that switching caused 2013 carbon emissions to fall by 14,700 tons/h. Lower gas prices also incentivized new investment in natural gas capacity. This less carbon-intensive capital stock led to an additional decrease of 2,100 tons/h in 2013. Using three approaches, I estimate that 65–85% of new capacity was constructed because of lower gas prices. A social cost of carbon of $35/ton values the estimated total decrease in 2013 emissions at roughly $5.1 billion.

Suggested Citation

  • Brehm, Paul, 2019. "Natural gas prices, electric generation investment, and greenhouse gas emissions," Resource and Energy Economics, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:resene:v:58:y:2019:i:c:s0928765518303270
    DOI: 10.1016/j.reseneeco.2019.06.003
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    Cited by:

    1. Christopher R. Knittel & Konstantinos Metaxoglou & Andre Trindade, 2015. "Natural Gas Prices and Coal Displacement: Evidence from Electricity Markets," NBER Working Papers 21627, National Bureau of Economic Research, Inc.
    2. Goodell, John W. & Gurdgiev, Constantin & Paltrinieri, Andrea & Piserà, Stefano, 2023. "Global energy supply risk: Evidence from the reactions of European natural gas futures to Nord Stream announcements," Energy Economics, Elsevier, vol. 125(C).
    3. Brehm, Paul A. & Zhang, Yiyuan, 2021. "The efficiency and environmental impacts of market organization: Evidence from the Texas electricity market," Energy Economics, Elsevier, vol. 101(C).
    4. Xie, Li & Li, Zexin & Ye, Xiuhua & Jiang, Yanru, 2021. "Environmental regulation and energy investment structure: Empirical evidence from China's power industry," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
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    6. Carroll, Deborah A. & Stevens, Kelly A., 2021. "The short-term impact on emissions and federal tax revenue of a carbon tax in the U.S. electricity sector," Energy Policy, Elsevier, vol. 158(C).
    7. Muehlenbachs, Lucija & Staubli, Stefan & Chu, Ziyan, 2021. "The accident externality from trucking: Evidence from shale gas development," Regional Science and Urban Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Carbon emissions; Climate change; Electricity; Fracking; Capital investment;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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