Emission responses to carbon pricing in electricity markets with intertemporal constraints

The Regional Greenhouse Gas Initiative (RGGI) regulates CO 2 emissions from the power sector in the northeastern states of the U.S. Its effectiveness has been criticized due to the low CO 2 allowance price and limited price variation, especially in the early years. Using a model that accounts for in...

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Bibliographic Details
Published inApplied economics letters Vol. ahead-of-print; no. ahead-of-print; pp. 1 - 7
Main Authors Zhou, Yishu, Zhao, Wangchuchu, Han, Daoru
Format Journal Article
LanguageEnglish
Published Routledge 21.06.2023
Subjects
Carbon pricing
emissions
Intertemporal constraints
RGGI
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Summary:The Regional Greenhouse Gas Initiative (RGGI) regulates CO 2 emissions from the power sector in the northeastern states of the U.S. Its effectiveness has been criticized due to the low CO 2 allowance price and limited price variation, especially in the early years. Using a model that accounts for intertemporal constraints, this paper studies how firms react to weak CO 2 emission regulations. The results show that the RGGI policy has helped decrease the total CO 2 emissions by at least 4.73%. An additional $1/ton increase in permit price reduces the total CO 2 emissions by 1.85%. CO 2 can be reduced by 23.50% if carbon is priced at $15/ton. Slight evidence of fuel switching from coal to natural gas is found.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2023.2226906