The Impact of Long-Term Generation Contracts on Valuation of Electricity Generating Assets under the Regional Greenhouse Gas Initiative
AbstractThe Regional Greenhouse Gas Initiative is an effort by nine states to constrain carbon dioxide emissions from the electric power sector using a cap-and-trade program. This paper assesses the importance of long-term electricity contracts under the program. We find that 12.2% of generation will be accounted for by long-term contracts in 2010, affecting select nuclear, hydroelectric, and cogeneration units. The contracts will have a negligible effect on the wholesale marginal cost of electricity and a small effect on retail price. States may want to consider contracts on a case-by-case basis when making decisions about the initial distribution of emission allowances, but they should account for effects on the portfolio of plants owned at the firm level, not the effects on individual facilities. Because of their relatively small effect, it seems unnecessary to allow the existence of long-term contracts to dictate the design of the overall program.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-05-37.
Date of creation: 08 Aug 2005
Date of revision:
climate; state policy; Regional Greenhouse Gas Initiative; long-term contracts; electricity;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Borenstein, Severin & Bushnell, James, 2000. "Electricity Restructuring: Deregulation or Reregulation?," Competition Policy Center, Working Paper Series qt22d2q3fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Burtraw, Dallas & Palmer, Karen & Kahn, Daniel, 2005. "Allocation of CO2 Emissions Allowances in the Regional Greenhouse Gas Cap-and-Trade Program," Discussion Papers dp-05-25, Resources For the Future.
- Meredith Fowlie, 2008. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," NBER Working Papers 14421, National Bureau of Economic Research, Inc.
- Palmer, Karen & Butraw, Dallas & Kahn, Danny, 2006. "Simple Rules for Targeting CO2 Allowance Allocations to Compensate Firms," Discussion Papers dp-06-28, Resources For the Future.
- Burtraw, Dallas & Palmer, Karen & Kahn, Daniel, 2005.
"CO2 Allowance Allocation in the Regional Greenhouse Gas Initiative and the Effect on Electricity Investors,"
dp-05-55, Resources For the Future.
- Burtraw, Dallas & Kahn, Danny & Palmer, Karen, 2006. "CO2 Allowance Allocation in the Regional Greenhouse Gas Initiative and the Effect on Electricity Investors," The Electricity Journal, Elsevier, vol. 19(2), pages 79-90, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster).
If references are entirely missing, you can add them using this form.