Dam Spillovers: The Direct and Indirect Costs from Environmental Constraints on Hydroelectric Generation

49 Pages Posted: 1 Oct 2017 Last revised: 30 Nov 2019

See all articles by James Archsmith

James Archsmith

University of Maryland, Department of Agricultural and Resource Economics

Date Written: November 25, 2019

Abstract

Full accounting of costs and benefits are essential to policy analysis, but regulations may have effects beyond firms covered by the policy. Considering a policy mandating stream flows below hydroelectric dams, I estimate both direct costs of regulation to regulated firms and spillovers to other electricity generators in the same market. Ignoring spillovers substantially underestimates true policy costs. These regulations increase market-wide costs as much as 19.8% and cause a substantial increase in pollution externalities. Further, decomposition of the effects reveal the cost of these policies will grow as climate change exacerbates water scarcity and renewable electricity generation capacity expands.

Keywords: Regulation, Spillovers, Electricity, Environment

JEL Classification: L51, Q25, Q51, Q52, Q53

Suggested Citation

Archsmith, James, Dam Spillovers: The Direct and Indirect Costs from Environmental Constraints on Hydroelectric Generation (November 25, 2019). Available at SSRN: https://ssrn.com/abstract=3046246 or http://dx.doi.org/10.2139/ssrn.3046246

James Archsmith (Contact Author)

University of Maryland, Department of Agricultural and Resource Economics ( email )

College Park
College Park, MD 20742
United States

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