The impact of electricity market reform and subnational climate policy on carbon dioxide emissions across the United States: A path analysis

Abstract

The United States began liberalizing its wholesale and retail electricity market to lower costs, increase efficiency, and curb oil imports in the 1990s. Reductions in carbon dioxide (CO2) were a possible desirable side effect of these reforms. In recent years, concerns over climate change have prompted state governments in the United States to adopt renewable portfolio standards and other subnational climate policies. Given the United States significant contributions to a warming climate, understanding the isolated and combined effects of these deregulatory reforms and subnational policies on CO2 emissions is critically important. This article sheds light on those effects with a series of recursive generalized linear models and a heterogeneous panel analysis of 50 states in the United States from 1990 to 2014. The modelling offers a novel approach for systematically tracing the paths through which policy, energy, and pricing variables register direct, indirect and interactive effects on CO2 emissions. The results demonstrate that wholesale--but not retail--reforms lowered CO2 emissions by increasing energy efficiency and renewable use. The results also suggest that wholesale reforms interacted with subnational climate policies to reduce CO2 emissions more than either these reforms alone. These findings have far-reaching implications for the United States and beyond.