The Heterogeneous Impacts of Low Natural Gas Prices on Consumers and the Environment
We show that low natural gas prices increase gas-fired electricity generation, reduce coal-fired electricity generation, and reduce wholesale electricity prices.
We show that low natural gas prices increase gas-fired electricity generation, reduce coal-fired electricity generation, and reduce wholesale electricity prices. However, not all regions experience the same degree of coal-to-gas generation switching or electricity price declines. Specifically, regions experiencing more coal-to-gas switching experience smaller electricity price drops. We provide intuition that may explain this pattern. This finding also has environmental and welfare consequences: coal-fired plants emit more pollutants, and therefore regions that benefit more from greater emissions reductions experience lower benefits from declining electricity prices. The finding highlights a mechanism through which a carbon price would have heterogeneous impacts across regions.
Josh Linn is a senior fellow at RFF. His research centers on the effects of environmental policies and economic incentives for new technologies in the transportation, electricity, and industrial sectors.
In Focus — Nov 30, 2023
In Focus: Carbon Markets and Carbon Dioxide Removal
This video shares insights about the risks of integrating carbon dioxide removal into carbon markets, with Massimo Tavoni, director of the RFF-CMCC European Institute on Economics and the Environment.
Media Highlight — Nov 10, 2023
Energy Evolution: “Fighting Climate Change with Carbon Offsets and Fossil Fuel Retirement Credits”
RFF Fellow Brian Prest is a guest on an S&P Global podcast episode about how carbon offset markets and oil and gas retirement credits and help serve decarbonization efforts.
Common Resources — Nov 9, 2023
Adding an Emissions Cap to the Inflation Reduction Act Would Help Meet US Climate Goals
Implementing a federal cap-and-trade policy would complement the Inflation Reduction Act. Together, these two policies could reduce air pollution and retail electricity prices and ensure that the United States meets its national climate goals for 2030.