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Environmental implications of market structure: Shale gas and electricity markets

Christopher Knittel (), Konstantinos Metaxoglou and Andre Trindade

International Journal of Industrial Organization, 2019, vol. 63, issue C, 511-550

Abstract: We examine the environmental implications of market structure using the exogenous variation in the price of natural gas paid by U.S. electric power producers in the aftermath of the Shale Boom. We find that electric power producers were more responsive to fuel prices in vertically integrated markets than in restructured markets, and we explore the underlying factors driving this heterogeneity in responses. Although differences in the capacity of the most efficient gas power plants between the two market structures are the most important factor, we consider others. The heterogeneity in the response of power plant operators to fuel prices has material implications for carbon dioxide emissions.

Keywords: Market structure; Environment; Coal displacement; Emissions; Electricity markets; Natural gas; Utilities (search for similar items in EconPapers)
JEL-codes: L51 L94 Q40 Q51 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:indorg:v:63:y:2019:i:c:p:511-550