Inferring Carbon Abatement Costs in Electricity Markets: A Revealed Preference Approach Using the Shale Revolution
American Economic Journal: Economic Policy
vol. 9,
no. 3, August 2017
(pp. 106-33)
Abstract
This paper examines how carbon pricing would reduce emissions in the electricity sector. Both carbon prices and cheap natural gas reduce the historic cost advantage of coal plants. The shale revolution resulted in unprecedented variation in natural gas prices that we use to estimate the potential near-term effects of carbon prices. Estimates imply that a price of $20 ($70) per ton of CO2 would reduce emissions by 5 (10) percent. Carbon prices are most effective at reducing emissions when natural gas prices are low, but have negligible effects when gas prices are at levels seen prior to the shale revolution.Citation
Cullen, Joseph A., and Erin T. Mansur. 2017. "Inferring Carbon Abatement Costs in Electricity Markets: A Revealed Preference Approach Using the Shale Revolution." American Economic Journal: Economic Policy, 9 (3): 106-33. DOI: 10.1257/pol.20150388Additional Materials
JEL Classification
- L94 Electric Utilities
- L98 Industry Studies: Utilities and Transportation: Government Policy
- Q35 Hydrocarbon Resources
- Q38 Nonrenewable Resources and Conservation: Government Policy
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q58 Environmental Economics: Government Policy
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