Pollution and the Price of Power

Working Papers from University of Toronto, Department of Economics

Abstract: Recent benefit-cost studies have shown that the marginal benefits from controlling conventional air emissions from coal-fired electric utility power plants in the US exceed marginal costs of pollution control. Moreover existing and proposed regulations ignore harm caused by the emission of greenhouse gases and harm caused in Canada. This means that electricity prices are too low wherever coal is the predominant fuel. However the same studies suggest that the mis-pricing of electricity is 4% or less. This paper will argue that in some regions of the US the wholesale price of electricity should be increased by up to 50%, if all externalities are to be included in the price. Getting the environmental price right could reduce pollution levels, increase energy conservation, and lead to wiser choices of new generation technology.

Keywords: electricity; electricity price; air pollution; emissions trading; CAIR (search for similar items in EconPapers)
JEL-codes: L94 Q40 Q42 Q50 Q51 Q53 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2006-07-19
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