Essays on Efficient Policy Interventions in Electricity, Natural Resource, and New Technology Markets
Designing policies to solve environmental problems is inherently difficult. Theoretically optimal policies are often impractical or are met with powerful political opposition. This is especially true for challenges such as climate change, for which effective mitigation policies may require buy in from a tremendous number of influential stakeholders across the globe. Energy markets are perhaps the most significant contributor to environmental damages worldwide due to the vast amounts of pollution created in electricity generation. I study the consequences of energy market policies in three settings. In my first chapter, I study the effect of government subsidies for the adoption of rooftop solar panels in California. The subsidies for solar installations declined over time in discrete steps, resulting in demand spikes preceding each subsidy decline. In a market like this, solar installers face a tradeoff between expanding installation capacity or offering long wait times to consumers. I document increases in installer backlogs and increases in waiting times near subsidy declines, and estimate the welfare losses to consumers caused by these increased waiting times. The second chapter studies the Regional Greenhouse Gas Initiative, a cap and trade program for CO2 emissions from electricity generators in the northeastern United States. I show that while RGGI CO2 allowance prices reduced emissions from coal plants within the RGGI area, allowance prices also resulted in an increase in emissions from natural gas plants in neighboring states, partially offsetting RGGI emissions reductions. However, natural gas results in less pollution per unit of electricity production than coal, meaning the RGGI was still effective in reducing overall emissions. Finally, my third chapter studies the effect of natural gas supply constraints in the northeastern United States. I show that increasing pipeline capacity into a state decreases the state average market price of electric-use natural gas, while increasing natural gas electricity generation at the expense of generation from coal and other fuels. These results imply that increasing pipeline capacity could have decreased overall pollution from electricity generation, as the regional generation mix would have shifted from coal toward relatively cleaner natural gas.
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