Environmentally Damaging Electricity Trade
AbstractElectricity trade across regions is often considered welfare enhancing. We show in this paper that this could 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 InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 592.
Date of creation: Nov 2009
Date of revision:
Publication status: Published in Energy Policy, vol.�38, n°3, Elsevier, mars 2010, p.�1548-1558.
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Electricity trade; hydropower; greenhouse gas emissions;
Other versions of this item:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-ENE-2010-01-16 (Energy Economics)
- NEP-ENV-2010-01-16 (Environmental Economics)
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