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Secular Trends, Environmental Regulation, and Electricity Markets

Author

Listed:
  • Burtraw, Dallas

    (Resources for the Future)

  • Palmer, Karen

    (Resources for the Future)

  • Paul, Anthony

    (Resources for the Future)

  • Woerman, Matt

    (Resources for the Future)

Abstract

The confluence of several pending environmental rulemakings will require billions of dollars of investment across the industry and changes in the operation of facilities. These changes may lead to retirement of some facilities, and there has been much debate about their potential effects on electricity reliability. Only very exceptional circumstances would trigger supply disruptions; however, the changes may affect electricity prices, the generation mix, and industry revenues. Coincident with these new rules, expectations about natural gas prices and future electricity demand growth are changing in ways that also will have substantial effects on the industry. This paper addresses these two sets of issues using a detailed simulation model of the U.S. electricity market. The findings suggest that recent downward adjustments in natural gas prices and electricty demand projections have a substantially larger impact on electricity prices and generation mix than do the new environmental rules.

Suggested Citation

  • Burtraw, Dallas & Palmer, Karen & Paul, Anthony & Woerman, Matt, 2012. "Secular Trends, Environmental Regulation, and Electricity Markets," RFF Working Paper Series dp-12-15, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-12-15
    as

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    File URL: http://www.rff.org/RFF/documents/RFF-DP-12-15.pdf
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    References listed on IDEAS

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    1. Burtraw, Dallas & Palmer, Karen & Paul, Anthony & Beasley, Blair & Woerman, Matt, 2013. "Reliability in the U.S. electricity industry under new environmental regulations," Energy Policy, Elsevier, vol. 62(C), pages 1078-1091.
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    Cited by:

    1. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    2. Eyer, Jonathan & Kahn, Matthew E., 2020. "Prolonging coal’s sunset: Local demand for local supply," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    3. Palmer, Karen & Paul, Anthony & Keyes, Amelia, 2018. "Changing baselines, shifting margins: How predicted impacts of pricing carbon in the electricity sector have evolved over time," Energy Economics, Elsevier, vol. 73(C), pages 371-379.
    4. Alexopoulos, Thomas A., 2017. "The growing importance of natural gas as a predictor for retail electricity prices in US," Energy, Elsevier, vol. 137(C), pages 219-233.
    5. Beasley, Blair & Woerman, Matt & Paul, Anthony & Burtraw, Dallas & Palmer, Karen, 2013. "Mercury and Air Toxics Standards Analysis Deconstructed: Changing Assumptions, Changing Results," RFF Working Paper Series dp-13-10, Resources for the Future.
    6. Burtraw, Dallas & Palmer, Karen & Munnings, Clayton & Weber, Paige & Woerman, Matt, 2013. "Linking by Degrees: Incremental Alignment of Cap-and-Trade Markets," RFF Working Paper Series dp-13-04, Resources for the Future.
    7. Linn, Joshua & Muehlenbachs, Lucija, 2018. "The heterogeneous impacts of low natural gas prices on consumers and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 1-28.
    8. Brehm, Paul, 2019. "Natural gas prices, electric generation investment, and greenhouse gas emissions," Resource and Energy Economics, Elsevier, vol. 58(C).
    9. Linn, Joshua & Anna Muehlenbachs, Lucija & Wang, Yshuang, 2014. "How Do Natural Gas Prices Affect Electricity Consumers and the Environment?," RFF Working Paper Series dp-14-19, Resources for the Future.

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    More about this item

    Keywords

    air pollution; electricity; regulation; equilibrium model;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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