Evaluating Emissions Reductions through the Regional Greenhouse Gas Initiative: A State and Plant-Level Analysis
by Nicholas Vassilios Papavassiliou
Abstract
In this study, I examine the impact of the Regional Greenhouse Gas Initiative (RGGI) on emission reductions in the electricity sector, focusing on three critical dimensions. First, I analyze temporal trends in emissions reductions to evaluate whether previously demonstrated progress has slowed as states exhaust low-cost mitigation pathways. Second, I assess regional impacts within electricity grid management areas, particularly the Pennsylvania-Jersey-Maryland Interconnection Regional Transmission Organization (PJM ISO) where participating and non participating states coexist, including investigating emissions leakage where reductions in RGGI states are offset by increases in neighboring non-RGGI states. Third, I extend the analysis to other greenhouse gases and co-pollutants. Employing difference indifferences and synthetic control methods, the findings show that the RGGI has a significant on the intensive margin, significantly reducing operating hours and heat input across all types of power plants. Alongside these reductions, RGGI spurs net facility exits and promotes fuel switching toward lower-carbon sources. As a result, both pollutant intensity and aggregate emissions decline over time, underscoring the program’s effectiveness. Examining these shifts in the context of regional electricity grids indicates that comprehensive coverage across interconnected markets can minimize leakage and better achieve environmental objectives, offering insights for the design of future regional climate policies.
Professor Jeffrey DeSimone, Faculty Advisor
Professor Michelle Connolly, Faculty Advisor
JEL Codes: Q41, Q48, Q52, Q58
Keywords: Cap-and-Trade, Emissions Leakage, Environmental Policy, Regional Greenhouse
Gas Initiative
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Responses to EU Carbon Pricing: The Effect of Carbon Emissions Allowances on Renewable Energy Development in Advanced and Transitional EU Members
By John Dearing
Using electricity price, generation, installed capacity, and carbon price data from the European Union from January 2015 to December 2018, this study finds that the carbon pricing in the European Union Emissions Trading Scheme (EU ETS) incentivizes electricity sector carbon emission reductions through renewable energy deployment only for economically advanced EU members. Transitional economies show a weak to modest carbon emission increase despite a common carbon price. This study estimates an electricity supply curve, or merit order, for 24 EU ETS members using a Tobit regression model and analyzes changes in this curve using a linear bspline. These shifts provide insight into how carbon pricing affected energy generation, price, and CO2 emissions for two distinct categories of EU member states. The advanced category as a whole saw a strong electricity sector decrease in carbon emissions, both over time and from carbon pricing, while the transitional category as a whole saw a weak increase. This indicates that advanced EU members in Northern, Western, and Central Europe likely sold permits to transitional ones in Southern and Eastern Europe. While these findings may initially reflect the gains from trade of carbon emissions, permits inherent in the European Union Emissions Trading Scheme’s design, the implications of how these two distinct groups have changed electricity generation present challenges to the ultimate long-term goal of EU-wide carbon neutrality by 2050, particularly in transitional economies’ electricity sectors.
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Advisors: Professor Lincoln Pratson, Professor Christopher Timmins | JEL Codes: Q4, Q43, Q48, Q5, Q52, Q56, Q58
