Three essays in energy, environmental and regional economics

Abstract

This dissertation is comprised of three studies on the relationship between energy and environmental issues and the regional economy. The first study presents evidence that electricity influx to the U.S. Northeast increased after the introduction of the Regional Greenhouse Gas Initiative (RGGI), a carbon emissions abatement program. Electricity influx means that emissions reductions achieved in the region are offset by increased emissions in other electricity-producing regions, as local generation is replaced with electricity imports. The empirical analysis is conducted using the synthetic control method. Results indicate that electricity imports increased after RGGI's establishment in 2009-with the increase predominantly coming after the emission cap was reduced in 2014-which suggests that leakage is occurring.

I then switch to exploring recent new energy development activity. In the second essay, I study a potential negative externality associated with hydraulic fracturing. More specifically, I examine the impact of unconventional drilling on housing prices. A prospective home buyer may want to avoid a place near sites that have been drilled using unconventional drill technologies, since those activities may lead to a variety of negative impacts including noise and underground water contamination. Adopting a hedonic price model, I estimate the avoided cost in two counties, Canadian and Payne, in Oklahoma. However, an environmental pollutant source and housing price may be difficult to explain with linear model, and I apply a semiparametric approach to deal with the possible non-linear relationship. The empirical results are consistent with in terms of physical housing characteristics and locational aspects in all cases, and find only a minimal impact of drilling activity on housing prices in the benchmark models. Further, the semiparametric estimation supports the finding that there is a limited relationship between unconventional drilling and housing prices in these counties.

In the third essay, I study a possible positive impact associated with recent energy development. I examine the regional employment change associated with recent energy developments in Arkansas, Kansas, and Oklahoma. Those three states have experienced a drastic increase in unconventional drilling, further, Kansas and Oklahoma show a rapidly growing wind energy sector. Those two types of relatively new energy development activities could be a beneficial source for employment in rural areas. Considering heterogeneous boom periods in the energy development activities in the three states, I apply a panel fixed effects model. I additionally incorporate a spatial econometrics specification to deal with spatial autocorrelation concerns. The results indicates that energy development activity does increase regional employment, but only for a small subset of industries. Moreover, the agricultural sector is negatively affected by energy development in most cases. In addition, unconventional drilling activity provides a larger positive impact on local employment than does activity for local wind farms.