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Does water scarcity shift the electricity generation mix toward fossil fuels? Empirical evidence from the United States

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  • Eyer, Jonathan
  • Wichman, Casey J.

Abstract

Water withdrawals for the energy sector are the largest use of fresh water in the United States. Using an econometric model of monthly plant-level electricity generation levels between 2001 and 2012, we estimate the effect of water scarcity on the US electricity fuel mix. We find that hydroelectric generation decreases substantially in response to drought, although this baseline generation is offset primarily by natural gas, depending on the geographic region. We provide empirical evidence that drought can increase emissions of CO2 and local pollutants. We quantify the social costs of water scarcity to be $330,000 per month for each plant that experiences a one-standard deviation increase in water scarcity (2015 dollars), a relationship that persists under future projections of water scarcity.

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  • Eyer, Jonathan & Wichman, Casey J., 2018. "Does water scarcity shift the electricity generation mix toward fossil fuels? Empirical evidence from the United States," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 224-241.
    • Handle: RePEc:eee:jeeman:v:87:y:2018:i:c:p:224-241
    DOI: 10.1016/j.jeem.2017.07.002
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    Cited by:

    1. Senni, Chiara Colesanti & von Jagow, Adrian, 2023. "Water risks for hydroelectricity generation," LSE Research Online Documents on Economics 119256, London School of Economics and Political Science, LSE Library.
    2. Xiaojun Yu & Russell Smyth & Yao Yao & Quanda Zhang, 2024. "Water stress and industrial firm productivity: Evidence from China," Monash Economics Working Papers 2024-20, Monash University, Department of Economics.
    3. Jin, Yi & Behrens, Paul & Tukker, Arnold & Scherer, Laura, 2019. "Water use of electricity technologies: A global meta-analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 115(C).
    4. Colesanti Senni, Chiara & Goel, Skand & von Jagow, Adrian, 2024. "Economic and financial consequences of water risks: The case of hydropower," Ecological Economics, Elsevier, vol. 218(C).
    5. Yang, Jie & Huang, Yijing & Takeuchi, Kenji, 2022. "Does drought increase carbon emissions? Evidence from Southwestern China," Ecological Economics, Elsevier, vol. 201(C).
    6. Mathilda Eriksson & Alejandro del Valle & Alejandro de la Fuente, 2025. "Droughts worsen air quality and health by shifting power generation," Nature Communications, Nature, vol. 16(1), pages 1-12, December.
    7. Eriksson,Mathilda & del Valle,Alejandro & De La Fuente,Alejandro, 2024. "Droughts Worsen Air Quality by Shifting Power Generation in Latin America and the Caribbean," Policy Research Working Paper Series 10760, The World Bank.
    8. Dario Aversa & Nino Adamashvili & Mariantonietta Fiore & Alessia Spada, 2022. "Scoping Review (SR) via Text Data Mining on Water Scarcity and Climate Change," Sustainability, MDPI, vol. 15(1), pages 1-13, December.
    9. Muhammad Saeed Meo & Solomon Prince Nathaniel & Muhammad Murtaza Khan & Qasim Ali Nisar & Tehreem Fatima, 2023. "Does Temperature Contribute to Environment Degradation? Pakistani Experience Based on Nonlinear Bounds Testing Approach," Global Business Review, International Management Institute, vol. 24(3), pages 535-549, June.
    10. Liang, Jing & Wu, Di, 2025. "Heatwaves worsen the air pollution from energy systems: Empirical evidence from balancing authorities in the United States," Energy Economics, Elsevier, vol. 148(C).
    11. Casey J. Wichman, 2017. "Book Review: “Thirst for Power: Energy, Water, and Human Survival”," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-4, January.
    12. Ordoñez, Pablo J., 2020. "Power Plants, Air Pollution, and Health in Colombia," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304284, Agricultural and Applied Economics Association.
    13. Zohrabian, Angineh & Sanders, Kelly T., 2018. "Assessing the impact of drought on the emissions- and water-intensity of California's transitioning power sector," Energy Policy, Elsevier, vol. 123(C), pages 461-470.
    14. Araujo, Rafael, 2024. "The value of tropical forests to hydropower," Energy Economics, Elsevier, vol. 129(C).
    15. Jenny R. Frank & Tristan R. Brown & Rohit D. Bhonagiri & Ryan J. Quinn & Kirsten C. McGiver & Marie-Odile P. Fortier & Robert W. Malmsheimer & Timothy A. Volk & Thomas R. Dapp, 2023. "Assessing Indian Point’s Electricity Generation Through Renewable Energy Pathways: A Technical and Economic Analysis," Energy & Environment, , vol. 34(4), pages 989-1005, June.
    16. Doan, Bao & Vo, Duc Hong & Pham, Huy, 2023. "The net economic benefits of power plants: International evidence," Energy Policy, Elsevier, vol. 175(C).

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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