Erin T. Mansur

Measuring Welfare in Restructured Electricity Markets

Restructuring electricity markets has enabled wholesalers to exercise market power. Using a common method to measure competition, several studies have found substantial inefficiencies. This method overstates actual welfare loss by ignoring production constraints that result in non-convex costs. I develop an alternative method that accounts for these constraints and apply it to the Pennsylvania, New Jersey, and Maryland market. For the summer following restructuring, the common method implies that market imperfections resulted in considerable welfare loss, with actual production costs exceeding the competitive models estimates by 1321. In contrast, my method finds that actual costs were only between 3 and 8 above the competitive levels.

Upstream Competition and Vertical Integration in Electricity Markets

Many studies have found substantial market failures in electricity markets that have been restructured to allow wholesalers to set prices. Vertical integration of firms may partially mitigate market power since integrated firms have a reduced interest in setting high prices. These producers sell electricity and also are required to buy power, which they provide to their retail customers at set rates. This paper examines the importance of vertical integration in explaining firm behavior during the first summer following the restructuring of the Pennsylvania, New Jersey, and Maryland wholesale market. I compare the behavior of other firms with that of two producers that, owing to variation in state policy, had relatively few retail customers. I conclude that restructuring led to an increase in anticompetitive behavior by large net sellers but that overall vertical integration both mitigates market power and diminishes its distributional impacts.

What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's Nox Trading Program

A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern Californias RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics.

Reformulating Competition?: Gasoline Content Regulation and Wholesale Gasoline Prices

The 1990 Clean Air Act Amendments stipulated gasoline content requirements for metropolitan areas with air pollution levels above predetermined federal thresholds. The legislation led to exogenous changes in the type of gasoline required for sale across U.S. metropolitan areas. This paper uses a panel of detailed wholesale gasoline price data to estimate the effect of gasoline content regulation on wholesale prices and price volatility. We investigate the extent to which the estimated price effects are driven by changes in the number of suppliers versus geographic segmentation resulting from regulation. We find that prices in regulated metropolitan areas increase significantly, relative to a control group, by an average of 3 cents per gallon. The price effect, however, varies by 8 cents per gallon across regulated markets and the heterogeneity across markets is correlated with the degree of geographic isolation generated by the discontinuous regulatory requirements.

The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations

Rather than allowing water prices to reflect scarcity rents during periods of drought-induced excess demand, policy makers have mandated command-and-control approaches, like the curtailment of certain uses, primarily outdoor watering. Using unique panel data on residential end-uses of water, we examine the welfare implications of typical drought policies. Using price variation across and within markets, we identify end-use specific price elasticities. Our results suggest that current policies target water uses that households, themselves, are most willing to forgo. Nevertheless, we find that use restrictions have costly welfare implications, primarily due to household heterogeneity in willingness-to-pay for scarce water.

Do Oligopolists Pollute Less? Evidence from a Restructured Electricity Market

Electricity restructuring has created the opportunity for producers to exercise market power. Oligopolists increase price by distorting output decisions, causing cross-firm production inefficiencies. This study estimates the environmental implications of production inefficiencies attributed to market power in the Pennsylvania, New Jersey, and Maryland electricity market. Air pollution fell substantially during 1999, the year in which both electricity restructuring and new environmental regulation took effect. I find that strategic firms reduced their emissions by approximately 20% relative to other firms and their own historic emissions. Next, I compare observed behavior with estimates of production, and therefore emissions, in a competitive market. According to a model of competitive behavior, changing costs explain approximately two-thirds of the observed pollution reductions. The remaining third can be attributed to firms exercising market power.

Damages and Expected Deaths Due to Excess NOx Emissions from 2009 to 2015 Volkswagen Diesel Vehicles

We estimate the damages and expected deaths in the United States due to excess emissions of NOx from 2009 to 2015 Volkswagen diesel vehicles. Using data on vehicle registrations and a model of pollution transport and valuation, we estimate excess damages of

Profiting from Regulation: An Event Study of the EU Carbon Market

430 million and 46 excess expected deaths. Accounting for uncertainty about emissions gives a range for damages from

Correspondence: Reassessing the contribution of natural gas to US CO2 emission reductions since 2007.

350 million to

Averting Enforcement: Strategic Response to the Threat of Environmental Regulation

500 million, and a range for excess expected deaths from 40 to 52. Our estimates incorporate significant local heterogeneity: for example, Minneapolis has the highest damages despite having fewer noncompliant vehicles than 13 other cities. Our estimated damages greatly exceed possible benefits from reduced CO2 emissions due to increased fuel economy.