Estimating Impact of Regional Greenhouse Gas Initiative on Coal to Gas Switching using Synthetic Control Methods

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Energy Economics



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Fuel switching from coal to much cleaner natural gas in electricity generation is one of significant factors explaining the recent substantial reduction in greenhouse gas emissions in the Regional Greenhouse Gas Initiative (RGGI) region (northeastern U.S.). Coal to gas switching has been triggered by the recent shale gas revolution, which the entire U.S has experienced, not RGGI region alone. If RGGI as a cap-and-trade carbon program did not work effectively, the rate of fuel switching would have been similar to that of other U.S. states. To estimate the effects of RGGI implementation in terms of the fuel switching, we use the synthetic control method for comparative case studies. Results provide a strong evidence that coal to gas switching has been actually accelerated by RGGI implementation. RGGI increases gas share in electricity generation in the RGGI region by roughly 10-15 percent point higher than the synthetic RGGI.

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