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Open AccessArticle

Short Run Effects of Carbon Policy on U.S. Electricity Markets

Division of Economics and Business, Colorado School of Mines, Jefferson County, CO 80401, USA
Energies 2019, 12(11), 2150; https://doi.org/10.3390/en12112150
Received: 8 May 2019 / Revised: 1 June 2019 / Accepted: 3 June 2019 / Published: 5 June 2019
(This article belongs to the Special Issue Energy Markets and Economics)
This paper presents estimates of short run impacts of a carbon price on the electricity industry using a cost-minimizing mathematical model of the U.S. market. Prices of $25 and $50 per ton of carbon dioxide equivalent emissions cause electricity emissions reductions of 17% and 22% from present levels, respectively. This suggests significant electricity sector emissions reductions can be achieved quickly from a modest carbon tax, and diminishing reductions occur when increasing from $25 to $50. The model captures short run effects via operational changes at existing U.S. power plants, mostly by switching production from coal to natural gas. A state-level analysis yields the following conclusions: (1) states which reduce the most emissions are high coal-consumers in the Mid-Atlantic and Midwest regions, (2) 15 states increase emissions after carbon policy because they increase natural gas consumption to offset coal consumption decreases in neighboring states, and (3) a flat per-capita rebate of tax revenue leads to wealth transfers across states. View Full-Text
Keywords: energy economics; energy policy; electricity markets; climate change; carbon tax energy economics; energy policy; electricity markets; climate change; carbon tax
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Dahlke, S. Short Run Effects of Carbon Policy on U.S. Electricity Markets. Energies 2019, 12, 2150.

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  • Externally hosted supplementary file 1
    Doi: 10.17605/OSF.IO/59PF6
    Link: https://osf.io/59pf6/
    Description: Short-run effects of carbon policy on U.S. electricity markets. Code, data, and results.
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