Inferring Carbon Abatement Costs in Electricity Markets: A Revealed Preference Approach Using the Shale Revolution

Joseph A. Cullen and Erin Mansur

American Economic Journal: Economic Policy, 2017, vol. 9, issue 3, 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.

JEL-codes: L94 L98 Q35 Q38 Q54 Q58 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/pol.20150388
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Citations: View citations in EconPapers (80)

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Working Paper: Inferring Carbon Abatement Costs in Electricity Markets: A Revealed Preference Approach using the Shale Revolution (2014)
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