Essays in Energy and Environmental Economics
This dissertation includes three papers discussing different aspects of environmental and energy economics and policy. The first paper ("Peaking Interest: How awareness drives the effectiveness of time-of-use electricity pricing") analyzes what factors drive consumer responses to time-of-use electricity pricing. Such pricing is an increasingly common policy that is designed to reduce reliance on high-cost, inefficient, and often polluting power plants. Using both survey and meter data on Irish households, I find that behavioral factors drive consumer responses: consumer awareness and information are key to inducing responses, and marginal prices have minimal effects.
The second paper ("Prices versus Quantities with Policy Updating", with William Pizer) is a theoretical study considering how intertemporal trading ("banking") under cap-and-trade style policies changes the traditional trade-off between price and quantity regulation (Weitzman 1974). Our theoretical model illustrates an unappreciated advantage of quantity regulation: expected policy updates are incorporated immediately through secondary markets via a no arbitrage condition. This helps us understand the welfare implications of observed price volatility in permit markets and has implications for the design of environmental regulations, such as the debate over the relative merits of a carbon tax versus "cap and trade'' policy.
The third paper ("Trophy Hunting vs. Manufacturing Energy: The Price Responsiveness of Shale Gas", with Richard Newell and Ashley Vissing) uses well-level data to estimate how the shale revolution has changed the price responsiveness of U.S. natural gas supply. We find that U.S. natural gas supply is approximately three times more price responsive as a result of the shale revolution, owing entirely to higher production per well. This improves our understanding of the market dynamics around natural gas supply.
Each of these papers has implications for environmental and energy policy. The first paper aims to understand how to improve the effectiveness of time-of-use electricity pricing policies. The second paper addresses an important feature of climate policy design, given high observed volatility in carbon allowance prices in the United States and Europe. The third paper aims to improve understanding of the recent changes in U.S. natural gas markets, with important implications for the fuel mix in electricity generation (in particular, coal-fired versus gas-fired generation) and hence CO2 emissions.
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Rights for Collection: Duke Dissertations