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The price-emissions nexus in U.S. residential electricity markets

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  • Feyzollahi, Maryam
  • Rafizadeh, Nima

Abstract

This study quantifies the impact of residential electricity prices on greenhouse gas (GHG) emissions, addressing a critical gap in climate policy analysis. Using panel data from 48 contiguous U.S. states (1990–2017), we develop a novel decomposition framework for the residential electricity price elasticity of GHG emissions (REPE-GHG) and employ two-step GMM estimation to address price endogeneity and dynamic consumption adjustments. Our results reveal a short-run residential electricity price elasticity of GHG emissions of −0.6% and a long-run elasticity of −5.2%. We find substantial regional heterogeneity, with elasticities in the Midwest and South significantly exceeding those in the Northeast. Moreover, the REPE-GHG exhibits a marked downward trend over time, accelerating post-2005. These findings suggest that uniform national pricing policies may be suboptimal and that price-based interventions become less effective as energy systems evolve.

Suggested Citation

  • Feyzollahi, Maryam & Rafizadeh, Nima, 2025. "The price-emissions nexus in U.S. residential electricity markets," Resource and Energy Economics, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:resene:v:83:y:2025:i:c:s0928765525000375
    DOI: 10.1016/j.reseneeco.2025.101513
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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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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