Sheikh Atiya Islam, Doctoral Candidate in Economics at Penn State, will present the EEEP Seminar Series, “Energy Transition in the Context of the First Market-based Cap and Trade Program in the US” on February 18, 2026.
Abstract:
The U.S. electricity sector has undergone a substantial transition from coal to natural gas and renewable generation over the past two decades, yet the extent to which environmental regulation has contributed to this shift remains unclear. This paper studies firm-level responses to the Regional Greenhouse Gas Initiative (RGGI), the first market-based carbon cap-and-trade program in the United States. Using plant-level data (2006-2020), preliminary reduced-form evidence documents increased coal-fired power plant retirements in participating states alongside capacity reallocation to non-RGGI states, consistent with emissions leakage. To quantify the role of policy in shaping these outcomes, we develop a dynamic structural model of electricity generation, pricing, investment, and relocation that incorporates differences in incentives across regulated and deregulated markets. The model is designed to disentangle policy-driven effects from broader market forces such as declining natural gas prices, measure the extent of cost pass-through to retail electricity prices, and evaluate the spillover effects of emissions regulation on neighboring states. Moving forward, we plan to use the estimated model to conduct counterfactual policy experiments that assess how the energy transition, firm location decisions, and consumer prices would have evolved in the absence of RGGI and under alternative regulatory regimes. This framework provides a unified approach to understanding how market-based environmental policies reshape firm behavior and electricity market outcomes.
Bio:
Sheikh Atiya Islam is a doctoral candidate in Economics with a primary research focus in Industrial Organization, particularly within the healthcare and energy industries. Islam is interested in studying economic agents’ decision-making in response to policy and information. Her current job market paper examines how changes in the legal environment influence physicians’ migration decisions. In her ongoing project with Dr. Emily Pakhtigian, she examines firm-level response to the first market-based cap-and-trade emissions policy in the US. Islam employs quantitative methods from applied microeconomics in her work, including difference-in-differences and structural modeling.