IDEAS home Printed from
   My bibliography  Save this article

Incentives of carbon dioxide regulation for investment in low-carbon electricity technologies in Texas


  • Castillo, Anya
  • Linn, Joshua


This paper compares the incentives a carbon dioxide emissions price creates for investment in low carbon dioxide-emitting technologies in the electricity sector. We consider the extent to which operational differences across generation technologies - particularly, nuclear, wind and solar photovoltaic - create differences in the incentives for new investment, which is measured by the operating profits of a potential entrant. First, astylized model of an electricity system demonstrates that the composition of the existing generation system may cause electricity prices to increase by different amounts over time when a carbon dioxide price is imposed. Differences in operation across technologies therefore translate to differences in the operating profits of a potential entrant. Then, a detailed simulation model is used to consider a hypothetical carbon dioxide price of $10-$50 per metric ton for the Electric Reliability Council of Texas (ERCOT) market. The simulations show that, for the range of prices considered, the increase in electricity prices is positively correlated with output from a typical wind unit, but the correlation is much weaker for nuclear and photovoltaic. Consequently, a carbon dioxide price creates much stronger investment incentives for wind than for nuclear or photovoltaic technologies in the Texas market.

Suggested Citation

  • Castillo, Anya & Linn, Joshua, 2011. "Incentives of carbon dioxide regulation for investment in low-carbon electricity technologies in Texas," Energy Policy, Elsevier, vol. 39(3), pages 1831-1844, March.
  • Handle: RePEc:eee:enepol:v:39:y:2011:i:3:p:1831-1844

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Weber, Thomas A. & Neuhoff, Karsten, 2010. "Carbon markets and technological innovation," Journal of Environmental Economics and Management, Elsevier, vol. 60(2), pages 115-132, September.
    2. Fischer, Carolyn & Fox, Alan, 2004. "Output-Based Allocations of Emissions Permits: Efficiency and Distributional Effects in a General Equilibrium Setting with Taxes and Trade," Discussion Papers dp-04-37, Resources For the Future.
    3. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
    4. David Popp, 2003. "Pollution control innovations and the Clean Air Act of 1990," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 641-660.
    5. Curtis Carlson & Dallas Burtraw & Maureen Cropper & Karen L. Palmer, 2000. "Sulfur Dioxide Control by Electric Utilities: What Are the Gains from Trade?," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1292-1326, December.
    6. Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
    7. Joshua Linn, 2008. "Technological Modifications in the Nitrogen Oxides Tradable Permit Program," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 153-176.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Motavasseli, Ali, 2016. "Essays in environmental policy and household economics," Other publications TiSEM b32e287e-169b-4e89-9878-1, Tilburg University, School of Economics and Management.
    2. Fell, Harrison & Linn, Joshua, 2013. "Renewable electricity policies, heterogeneity, and cost effectiveness," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 688-707.
    3. Knizley, Alta A. & Mago, Pedro J. & Smith, Amanda D., 2014. "Evaluation of the performance of combined cooling, heating, and power systems with dual power generation units," Energy Policy, Elsevier, vol. 66(C), pages 654-665.
    4. Aryanpur, Vahid & Shafiei, Ehsan, 2015. "Optimal deployment of renewable electricity technologies in Iran and implications for emissions reductions," Energy, Elsevier, vol. 91(C), pages 882-893.
    5. repec:eco:journ2:2017-02-23 is not listed on IDEAS

    More about this item


    Electricity Investment Carbon price;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:39:y:2011:i:3:p:1831-1844. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.