Secular Trends, Environmental Regulation, and Electricity Markets

Resources for the Future DP 12-15

24 Pages Posted: 12 Apr 2012

See all articles by Dallas Burtraw

Dallas Burtraw

Resources for the Future

Karen L. Palmer

Resources for the Future

Anthony C. Paul

Resources for the Future

Matt Woerman

University of Massachusetts Amherst

Date Written: March 22, 2012

Abstract

The confluence of several pending environmental rule-makings 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.

Keywords: air pollution, electricity, regulation, equilibrium model

JEL Classification: Q41, Q52, Q58

Suggested Citation

Burtraw, Dallas and Palmer, Karen and Paul, Anthony C. and Woerman, Matt, Secular Trends, Environmental Regulation, and Electricity Markets (March 22, 2012). Resources for the Future DP 12-15, Available at SSRN: https://ssrn.com/abstract=2038838 or http://dx.doi.org/10.2139/ssrn.2038838

Dallas Burtraw (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5087 (Phone)

Karen Palmer

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Anthony C. Paul

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Matt Woerman

University of Massachusetts Amherst ( email )

Amherst, MA
United States

HOME PAGE: http://https://sites.google.com/site/mattwoerman/

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