Fundacao Getulio Vargas / EPGE
Praia de Botafogo, 190
Rio de Janeiro, RJ 22250-900 Brazil
Institutional Affiliation: Fundacao Getulio Vargas / EPGE
NBER Working Papers and Publications
|April 2018||Coordinating Separate Markets for Externalities|
with Jose-Miguel Abito, Christopher R. Knittel, Konstantinos Metaxoglou: w24481
We show that inefficiencies from having separate markets to correct an environmental externality are significantly mitigated when firms participate in an integrated product market. Firms take into account the distribution of externality prices and reallocate output from markets with high prices to markets with low prices. Investment in cleaner and more efficient capacity serves as an additional mechanism to reallocate output, which increases the marginal benefit of investment, and consequently improves longer-term outcomes. Using data from an integrated wholesale electricity market, we estimate a dynamic structural model of production and investment to bound the loss from separate markets for carbon dioxide emissions, and quantify the extent to which optimal investment can compensate for t...
|October 2015||Natural Gas Prices and Coal Displacement: Evidence from Electricity Markets|
with Christopher R. Knittel, Konstantinos Metaxoglou: w21627
We examine the environmental impact of the post-2005 natural gas glut in the United States due to the shale gas boom. Our focus is on quantifying short-term coal-to-gas switching decisions by different types of electric power plants in response to changes in the relative price of the two fuels. In particular, we study the following entities: investor-owned utilities (IOUs) and independent power producers (IPPs) in restructured markets coordinated by Independent System Operators, as well as IOUs in traditional vertically-integrated markets. Using alternative data aggregations and model specifications, we find that IOUs operating in traditional markets are more sensitive to changes in fuel prices than both IOUs and IPPs in restructured markets. We attribute our findings to differences in ava...