Do Electricity Markets Promote Decarbonization? Evidence From State Level Data in the United States *

80 Pages Posted: 28 Jun 2023

See all articles by L. Lynne Kiesling

L. Lynne Kiesling

Northwestern University; University of Colorado Denver; Knowledge Problem LLC

Joshua Rhodes

University of Texas at Austin

Samantha Zyontz

Boston University - Questrom School of Business; Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: July 08, 2024

Abstract

Since the mid-1990s the changing electricity generation technology mix has resulted in electricity sector carbon dioxide emissions that are 32 percent lower than their 2005 levels. What role have wholesale power markets played in enabling this decarbonization? We examine this question using annual state-level data for 1990-2020. The institutional complexity of the history of wholesale power markets and regulatory restructuring informs our block treatment window difference-indifferences empirical strategy, in which we compare generation in restructured states to different control states across different time periods. Our results suggest that wholesale power markets had the greatest impact on the generation fuel mix relative to the control states in the period up to 2012, largely but not entirely due to the substitution of natural gas for other fossil fuel generation, namely coal. In more recent years, restructured states and control states look more similar in their generation mix. Our event study results support this conclusion.

Keywords: Market structure, Electricity markets, Technology, Environment, Emissions

JEL Classification: L94, L95, Q35, Q38, Q42, Q53

Suggested Citation

Kiesling, L. Lynne and Rhodes, Joshua and Zyontz, Samantha, Do Electricity Markets Promote Decarbonization? Evidence From State Level Data in the United States * (July 08, 2024). Available at SSRN: https://ssrn.com/abstract=4492039 or http://dx.doi.org/10.2139/ssrn.4492039

L. Lynne Kiesling (Contact Author)

Northwestern University ( email )

375 E Chicago Ave
Chicago, IL 60611
United States

University of Colorado Denver ( email )

1475 Lawrence St
Denver, CO 80238-3363
United States

Knowledge Problem LLC ( email )

Chicago, IL 60613
United States

HOME PAGE: http://www.lynnekiesling.com

Joshua Rhodes

University of Texas at Austin ( email )

Texas
United States

Samantha Zyontz

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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