Distributional Impacts of Climate Change from California’s Electricity Sector

This study analyzed the impacts of climate change driving the demand for electricity and its consequent air quality impacts on segments of California’s population and economy. The study investigated the energy effects of climate change on disadvantaged and non-disadvantaged communities as defined in Senate Bill 535 (De León, Chapter 830, Statutes of 2012). The impact estimates were obtained by applying econometric estimators to billing data from California’s investor-owned utilities, which allow for impact simulations under future climate with and without adaptation. Senate Bill 535 communities are projected to see larger percentage increases in electricity consumption and smaller decreases in natural gas consumption than their non-Senate Bill 535 counterparts.

An additional analysis explored the distributional consequences of changes in air pollution due to increases in electricity load. Higher demand for electricity, especially at peak times, would result in higher emissions of local air pollutants from fossil plants, which translate to higher ambient concentrations downwind. The researchers simulated the impact of a 20 percent change in aggregate electricity demand and translated these associated increases in emissions into changes in ambient concentrations of oxides of nitrogen (NOx), sulfur oxide (SOx), and particulate matter (PM2.5). Results indicate that disadvantaged communities could experience twice the increase in ambient concentrations compared to non-disadvantaged communities. Communities with larger incomes, more Caucasians and populations of young and old people have lower increases in ambient concentrations. The researchers also found that the additional increases in ambient concentrations from a 20 percent increase in demand are relatively small. This suggests that addressing the local air pollution challenge by focusing on peak electricity alone will likely not cause dramatic air quality improvements. This study, however, can be used to examine the air pollution driven benefits and costs of emissions reductions from decreases and increases in load to different groups of ratepayers across the state.