Between 2008 and 2012, the delivered price of natural gas to the U.S. power sector fell 60 percent. This paper addresses, in theory and in practice, the effects of this negative price shock on electricity consumers and the environment. We demonstrate with a simple model that the larger the effects of gas prices on consumer welfare, the smaller the effects on pollution emissions and the smaller the increase in profits of existing natural gas–fired generators. Using detailed data on electricity prices, fuel consumption, and fuel prices from 2001 to 2012, we confirm this hypothesis. Regions that experience greater reductions in pollution emissions experience smaller reductions in electricity prices and consumer welfare.
The Impact of Natural Gas Prices on Electricity Consumers and the Environment
Coinciding with the recent increase in US natural gas production, the country has seen a 60 percent decrease in the price of natural gas. Lower nat...
Stepping on the Gas: The Evolving Climate Impacts of the US Shale Boom
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