“Implications of Residential Energy Pricing for Energy Substitution and Welfare”
Severin Borenstein (University of California, Berkeley)
Joint with James Bushnell (University of California, Davis)
Most strategies for addressing climate change rely to a large extent on household substitution away from higher-carbon energy sources, such as gasoline. Yet, most of this policy development has downplayed or ignored the impact of residential energy prices on the likelihood or cost of such transitions. In this project, we evaluate and compare the gap between marginal prices and social marginal cost for the three major energy sources available to households: electricity, natural gas, and gasoline. We then consider the implications for energy source substitution in general, and for three particular applications: electric versus gasoline powered vehicles, electric versus natural gas water heating, and electric versus natural gas space heating.
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