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Pollution and the Price of Power

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  • Donald N Dewees

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.

Suggested Citation

  • Donald N Dewees, 2006. "Pollution and the Price of Power," Working Papers tecipa-246, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-246
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    References listed on IDEAS

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    10. Donald N. Dewees, 2006. "Electricity Restructuring and Regulation in the Provinces: Ontario and Beyond," Working Papers tecipa-205, University of Toronto, Department of Economics.
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    Citations

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    Cited by:

    1. Li, Zhe, 2008. "Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy," MPRA Paper 9564, University Library of Munich, Germany.
    2. Vera, Sonia & Sauma, Enzo, 2015. "Does a carbon tax make sense in countries with still a high potential for energy efficiency? Comparison between the reducing-emissions effects of carbon tax and energy efficiency measures in the Chile," Energy, Elsevier, vol. 88(C), pages 478-488.
    3. Donald Dewees & Trevor Tombe, 2011. "The Impact of Sub-Metering on Condominium Electricity Demand," Canadian Public Policy, University of Toronto Press, vol. 37(4), pages 435-457, December.
    4. Dormady, Noah & Healy, Paul J., 2019. "The consignment mechanism in carbon markets: A laboratory investigation," Journal of Commodity Markets, Elsevier, vol. 14(C), pages 51-65.
    5. Niu, Shilei & Insley, Margaret, 2013. "On the economics of ramping rate restrictions at hydro power plants: Balancing profitability and environmental costs," Energy Economics, Elsevier, vol. 39(C), pages 39-52.
    6. Tang, Ling & Wu, Jiaqian & Yu, Lean & Bao, Qin, 2017. "Carbon allowance auction design of China's emissions trading scheme: A multi-agent-based approach," Energy Policy, Elsevier, vol. 102(C), pages 30-40.
    7. Dormady, Noah C., 2014. "Carbon auctions, energy markets & market power: An experimental analysis," Energy Economics, Elsevier, vol. 44(C), pages 468-482.
    8. Dormady, Noah C., 2013. "Market power in cap-and-trade auctions: A Monte Carlo approach," Energy Policy, Elsevier, vol. 62(C), pages 788-797.
    9. Qunwei Wang & Cheng Cheng & Dequn Zhou, 2020. "Multi-round auctions in an emissions trading system considering firm bidding strategies and government regulations," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(7), pages 1403-1421, October.

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    More about this item

    Keywords

    electricity; electricity price; air pollution; emissions trading; CAIR;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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