Short Run Effects of Carbon Policy on U.S. Electricity Markets
Round 1
Reviewer 1 Report
The current manuscript requires minor revision to be published in Energies.
This estimation of short-run carbon policy impacts at the US state-level using a cost-minimizing mathematical method provides very substantive policy implications. The predicted impacts in this study may be economically or technically feasible but this study also needs to discuss some implications regarding the political feasibility of these estimated impacts considering each state’s distinct political/policy situations.
Author Response
This estimation of short-run carbon policy impacts at the US state-level using a cost-minimizing mathematical method provides very substantive policy implications. The predicted impacts in this study may be economically or technically feasible but this study also needs to discuss some implications regarding the political feasibility of these estimated impacts considering each state’s distinct political/policy situations.
Thank you for this feedback. I have made two sets of revisions in response. First, I added a paragraph to section the early part of section 4.2 discussing state-level political economy factors that are relevant to their response to federal carbon policy. This includes but is not limited to state-level greenhouse gas policies and regulations lobbied for by the fossil fuel industry that could preempt the cost-minimizing response.
Second, I added a paragraph to the later part of section 4.2 discussing some political implications of the heterogeneous per capita tax revenue with a rebate policy. Specifically, I counted up the votes for and against carbon policy if U.S. legislators voted consistent with whether their state received per capita short run net benefits or net costs due to the rebate. This analysis concludes that majorities in both the House and the Senate would support the policy.
Reviewer 2 Report
he paper is really interesting, both for the academic community and for the industry, although there are some changes that can improve its understanding.
1) Both in the abstract and in the rest of the paper, the author presents the expected emission reductions if the CO2 prices were $25 and $50. It would make sense to graphically represent these variations and estimate values of elasticity or semi-elasticity to present the results.
2) On page 4, line 170, the author assumes that there are no network congestions. This is an assumable but strong simplification, so he should explain more about what these restrictions consist of and how they are currently affecting the market equilibrium.
3) It should also be made clear that supply and demand offers are simple, i.e. they are not linked (e.g. minimum price or minimum hours), as well as the effect that this type of offer actually has on the markets studied.
4) In Table 5, page 13, presents the variations in average prices in each system. It would make sense and help to present the results to include price elasticities of C02/energy price, to see its sensitivity.
5) Table 7 on page 18 should include the units in the table header. Otherwise, it is difficult to interpret the following
6) Finally, the whole paper is written in the first person singular, not being suitable for this type of academic products. I suggest the author change the verb tense to passive impersonal.
Author Response
1) Both in the abstract and in the rest of the paper, the author presents the expected emission reductions if the CO2 prices were $25 and $50. It would make sense to graphically represent these variations and estimate values of elasticity or semi-elasticity to present the results.
The elasticity calculations are a good idea, I respond to this point further in comment #4. I also agree it makes sense to graphically represent the results. I present total changes in emissions for each price scenario in a bar chart relative to the U.S.’s Paris commitment (Figure 5), and also show state-level changes in emissions in a map (Figure 6). If you have other ideas of ways to effectively visualize these results I am happy to take your advice and oblige.
2) On page 4, line 170, the author assumes that there are no network congestions. This is an assumable but strong simplification, so he should explain more about what these restrictions consist of and how they are currently affecting the market equilibrium.
Good point, I have added a handful of sentences following line 170 describing the implications of this assumption.
3) It should also be made clear that supply and demand offers are simple, i.e. they are not linked (e.g. minimum price or minimum hours), as well as the effect that this type of offer actually has on the markets studied.
Done. Sentences have been added at the beginning of page 5.
4) In Table 5, page 13, presents the variations in average prices in each system. It would make sense and help to present the results to include price elasticities of C02/energy price, to see its sensitivity.
I have calculated regional “emissions elasticities of price” and added them to Table 5. This is calculated as the percent change in total regional emissions divided by the percent change in average price. It gives an indication of the short run cost-effectiveness of the policy that can be compared across regions. For example, the Northwest region has a value of -0.35, indicating that a 1% change in price is associated with a 0.35% decrease in emissions due to the policy. In addition to revising Table 5, I have added a paragraph explaining this in section 4.1.
5) Table 7 on page 18 should include the units in the table header. Otherwise, it is difficult to interpret the following.
Done.
6) Finally, the whole paper is written in the first person singular, not being suitable for this type of academic products. I suggest the author change the verb tense to passive impersonal.
The tense of the paper has been changed to passive impersonal.
Reviewer 3 Report
This paper provides an interesting analysis of carbon pricing in US electricity markets based on electricity generation region types across the US. There is significant variation noted in a per capita carbon tax (see figure 9 and table 7), my query would how this compares to Gross State Product per capita and whether that relationship can be linked to features of the current policy environment,
Author Response
This paper provides an interesting analysis of carbon pricing in US electricity markets based on electricity generation region types across the US. There is significant variation noted in a per capita carbon tax (see figure 9 and table 7), my query would how this compares to Gross State Product per capita and whether that relationship can be linked to features of the current policy environment.
Thank you for this suggestion. The tax revenue results indicate a negative relationship between a state’s wealth and their per capita carbon tax revenue. The correlation coefficient between a state’s 2018 gross state product and the per capita revenue in the $50/ton scenario is -0.27. While correlation does not imply causation, it can be speculated from this empirical observation that states with wealthier citizens are more likely to demand cleaner energy production, or import dirty energy from neighbors, to avoid experiencing the harmful effects of air pollution. As a result, the wealthier states would have a lower carbon tax burden, and receive a relatively higher benefit from a per capita revenue rebate.
This discussion has been added to section 4.2.
