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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.

Suggested Citation

  • 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. Jie Yang & Yijing Huang & Kenji Takeuchi, 2020. "Does Drought Increase Carbon Emissions? Evidence from Southwestern China," Discussion Papers 2015, Graduate School of Economics, Kobe University.
    2. 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.
    3. 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.
    4. 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).
    5. 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.

    More about this item

    Keywords

    Water scarcity; Electricity generation; CO2 emissions; Air pollution; Climate change;

    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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