Decompositions and Policy Consequences of an Extraordinary Decline in

Air Pollution from Electricity Generation

Stephen P. Holland—University of North Carolina Greensboro & NBER

Erin Mansur—Dartmouth College & NBERNicholas Z. Muller—Carnegie Mellon University & NBER

Andrew J. Yates—University of North Carolina

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Environmental benefit of an EV (TE3 2015!!)

Methods: GV v. EV Damages from AP3 Estimated EV emissions

using 2010-12 data

Mean Damages: EV: 2.50 cents per mile GV: 2.00 cents per mile

Benefit of EV Los Angeles 3.3 cent/mile Grand Forks -3.0 cnt/mle

2Electric v. Gasoline 2014 Ford Focus

The extraordinary decline

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CO2

PM2.5

NOX

SO2

Notes: Total CEMS power plant hourly emissions in 48 states normalized to 100 in 2010.

Describing the decline in damages: by pollutant

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Notes: Damages in billions of 2014 aggregated across all CEMS power plants using AP3 damage estimates & social cost of carbon.

Damages fall from $245 billion in 2010 to $133 billion in 2017.-- 45% decline -- Benefit of $350 per capita.

Describing the decline in damages: by fuel

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Notes: Damages in billions of 2014 aggregated across all CEMS power plants using AP3 damage estimates & social cost of carbon.

Damages fall from $245 billion in 2010 to $133 billion in 2017.-- 45% decline -- Benefit of $350 per capita.

What does cleaner electricity imply about electrification policy?

Policy depends on marginal damages, e.g., damages from driving the EV

6 Cleaner grid →EV’s are cleaner Cleaner grid →EV’s not cleaner

Local polynomial estimates of damage functions

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Notes: Local polynomial regressions of hourly damages (millions of 2014$) on hourly load (GW) by interconnection. Load & damage means: 339 & 21 (East); 85 & 2.2 (West); 39 & 1.8 (Texas).

East West

Texas

Estimating marginal damages

Main regression equation:

𝐷𝐷𝐷𝐷𝑚𝑚𝑡𝑡 = 𝛽𝛽𝛽𝛽𝛽𝛽𝐷𝐷𝑑𝑑𝑡𝑡 + 𝛾𝛾𝛽𝛽𝛽𝛽𝐷𝐷𝑑𝑑𝑡𝑡𝑌𝑌𝑌𝑌𝐷𝐷𝑟𝑟𝑡𝑡 + 𝛼𝛼𝑚𝑚𝑚 + 𝜖𝜖𝑡𝑡

𝛽𝛽 and 𝛾𝛾 are coefficients of interest 𝛼𝛼𝑚𝑚𝑚 is month of sample*hour fixed effect (=8*12*24 FEs) N=70,128 (=8 years * 365 days * 24 hours) Newey-West standard errors (24 hour lag)

Estimated at interconnection level Also estimate 𝛽𝛽 by year

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Marginal damage estimates over time

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Notes: Marginal damages measured in dollars per kWh. Lines show predicted trends from regressions on full sample. Point estimates with 95% CI are from annual regressions.

Annual Growth Rates

Margin Average

East -5.1% -9.3%

West +5.1% -2.7%

Texas +3.5% -1.3%

Annual environmental benefit of electric vehicle

10Notes: Environmental benefit is difference between damages from a gasoline and from an electric Ford Focus over 15,000 annual miles. EPRI charging profile.

2010 damages 2017 damages

National average: -$81Range: -$390 to +$781

National average: +$72Range: -$186 to +$939

Conclusion & summary

Extraordinary decline in electricity damages from 2010-17 $245 billion to $133 billion; 45% drop Mainly SO2; mainly coal

Decomposition Scale: renewables (-$25 billion) Technique: scrubbers (-$63 billion) Composition: fuel-switching

(-$60 billion) Valuation: (+$35 billion)

Implications for electrification policies EV benefits increased on average

Substantial heterogeneity remains

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