UMass Amherst Study Shows How Electricity Pricing is Linked to Greenhouse Gas Emissions

A new study from the University of Massachusetts Amherst establishes a link between what U.S. households pay for electricity and greenhouse gas (GHG) emissions from power generation.

Analyzing data from the 48 contiguous states between 1990 and 2017, the study, published in Resource and Energy Economics, found that a 1% increase in residential electricity rates led to only a 0.6% reduction in emissions in the short term through measures like adjusting thermostats, turning off lights and running appliances less. However, the same rate hike produced a considerable 5.2% reduction in emissions over the long term through the adoption of more energy-efficient appliances, heating and cooling system upgrades, and better insulation.

Maryam Feyzollahi and Nima Rafizadeh, doctoral students in the Department of Resource Economics at UMass Amherst, determined that, on average, it takes about nine years for households to fully adjust to higher power rates. This suggests that energy policy decisions made today may not show their full effects until around 2034.

Residential electricity demand constitutes about 40% of total electricity consumption in the U.S. The electricity sector accounts for about 25% of GHG emissions nationally.

Feyzollahi and Rafizadeh created a new metric called the Residential Electricity Price Elasticity of GHG emissions (REPE-GHG). This measure captures the full chain reaction from a price change to an emissions outcome, overcoming long-standing challenges in measuring how prices affect both consumption and emissions.