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Power Trade, Welfare, and Air Quality

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  • Abdurrahman Aydemir

    (College of Arts and Social Sciences, Sabanci University)

  • Talat Genc

    (Department of Economics and Finance, University of Guelph)

Abstract

We use detailed data from all generators in the Ontario wholesale electricity market to investigate cross-border electricity trade and its impact on air emissions and welfare in Ontario. Using the technical characteristics of the generators and financial data we run a competition model every hour and find that the model generates actual prices and outputs with 94.4% and 96% accuracy, respectively. We show that there is a significant welfare gain from power trade. The air emissions savings are also considerable. For instance, when hourly imports double from current levels CO2 emissions decrease around 13%, and market prices reduce 5.4%. In autarky, CO2, SO2, NOx emissions increase 12%, 22%, 16%, resp., the prices go up 5.8%, and the price volatility rises 12%. However, the impact of negative wholesale prices on market outcomes is small.

Suggested Citation

  • Abdurrahman Aydemir & Talat Genc, 2014. "Power Trade, Welfare, and Air Quality," Working Papers 1401, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2014-01
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    Cited by:

    1. Genc, Talat S., 2016. "Measuring demand responses to wholesale electricity prices using market power indices," Energy Economics, Elsevier, vol. 56(C), pages 247-260.
    2. Talat S. Genc & Stephen Kosempel, 2023. "Energy Transition and the Economy: A Review Article," Energies, MDPI, vol. 16(7), pages 1-26, March.
    3. Genc, Talat S. & Thille, Henry & ElMawazini, Khaled, 2020. "Dynamic competition in electricity markets under uncertainty," Energy Economics, Elsevier, vol. 90(C).
    4. Genc, Talat S. & Reynolds, Stanley S., 2019. "Who should own a renewable technology? Ownership theory and an application," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 213-238.

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    More about this item

    Keywords

    Electricity trade; interconnected markets; air emissions; welfare;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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