Carbon pricing and power sector decarbonization: Evidence from the UK

Marion Leroutier

143 citations0/0 files storedJournal of Environmental Economics and Management

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Climate Change Policy and Economics Renewable energy and sustainable power systems Energy, Environment, Economic Growth

Abstract

Decreasing greenhouse gas emissions from electricity generation is crucial to tackle climate change. Empirically, however, little is known about the effectiveness of existing economic instruments in the power sector. This paper examines the impact of the UK Carbon Price Support (CPS), a carbon tax implemented in the UK power sector in 2013. Relative to a synthetic control unit built from other European countries, I find that emissions from the UK power sector declined by 20 to 26 percent per year on average between 2013 and 2017. The tax operated via three mechanisms: a decrease in emissions at the intensive margin; the closure of some high-emission plants at the extensive margin; and a higher probability of closure for plants already at risk due to European air quality regulations.

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References

2003The Economic Costs of Conflict: A Case Study of the Basque Country 2014Comparative Politics and the Synthetic Control Method 2021Does carbon pricing reduce emissions? A review of ex-post analyses 2015The Impact of the European Union Emissions Trading Scheme on Regulated Firms: What Is the Evidence after Ten Years?2014The impact of a carbon tax on manufacturing: Evidence from microdata 2015The European Union Emissions Trading System: Ten Years and Counting 2018State and Trends of Carbon Pricing 2018 2018Rapid fuel switching from coal to natural gas through effective carbon pricing

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