The Impact of Trade on Emissions Responses to Renewable Supply Variation

Reducing barriers to trade --- one approach to facilitate the integration of renewables on the electricity grid --- affects emissions externalities by altering which fossil fuel power plants generate and emit criteria pollutants. We use the Western Energy Imbalance Market as a case study to quantify how plants change their emissions response to wind and solar generation after a market expansion. We find that, on average, plant responses shrink after entering the market. The average plant response, while still negative, becomes less so, as it becomes easier for a region to import or export electricity to balance local renewable variability. Specifically, responses to solar increase by between 0.80 to 1.85 percent and responses to wind increase by between 0.01 to 0.02 percent. This effect is larger for plants in regions without a pre-existing market mechanism prior to entry. While all participants gain an increased diversity and quantity of supply and demand sources, plants without prior market access also benefit from the move to a more efficient method of trade.