Power trade,welfare, and air quality |
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| Affiliation: | 1. Department of Economics, University of Guelph, Guelph N1G2W1, ON, Canada;2. College of Arts and Social Sciences, Sabanci University, Istanbul, Turkey;1. New Mexico Institute of Mining & Technology, Department of Management, 801 Leroy Place, Socorro, NM 87801, USA;2. Tokyo Institute of Technology, School of Environment and Society, 2-12-1 Ookayama, Tokyo 152-8552, Japan;3. China University of Political Science and Law, Business School, 25 Xitucheng Road, Beijing 100088, China |
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| Abstract: | We use detailed microdata from all generators in the Ontario wholesale electricity market to investigate cross-border electricity trade and its impact on air emissions and welfare (consumer and producer surpluses) in Ontario. Using the technical characteristics of the generators and financial data we run a competition model every hour. We examine how trade expansion across different parts of the interconnected power grid affects the efficiency in the Ontario market. We show that there is a significant welfare gain from power trade. The air emissions savings are also considerable. For instance, when hourly imports double from current levels CO2 emissions decrease around 13%, and market prices reduce 5.4%. In autarky, CO2, SO2, NOx emissions increase 12%, 22%, 16%, resp., the prices go up 5.8%, and the price volatility rises 12%. However, the impact of negative wholesale prices on market outcomes is small. |
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