Working Paper: NBER ID: w20795
Authors: Joseph A. Cullen; Erin T. Mansur
Abstract: This paper examines how much carbon emissions from the electricity industry would decrease in response to a carbon price. We show how both carbon prices and cheap natural gas reduce, in a nearly identical manner, the historic cost advantage of coal-fired power plants. The shale revolution has resulted in unprecedented variation in natural gas prices that we use to estimate the short-run price elasticity of abatement. Our estimates imply that a price of $10 ($60) per ton of carbon dioxide would reduce emissions by 4% (10%). Furthermore, carbon prices are much more effective at reducing emissions when natural gas prices are low. In contrast, modest carbon prices have negligible effects when gas prices are at levels seen prior to the shale revolution.
Keywords: No keywords provided
JEL Codes: Q4; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon price (P22) | emissions reduction (Q52) |
| natural gas prices (Q31) | carbon price effectiveness (D61) |
| carbon price (low) (Q31) | emissions reduction (Q52) |
| coal-to-gas switching (L94) | emissions reduction (Q52) |
| carbon pricing (Q58) | local emissions reduction (Q52) |