Researchers Siyuan Wang and Fengqi You of Cornell University built an integrated empirical and simulation framework using ten years of operational and market data from the New York Independent System Operator, or NYISO, the organization that runs the state’s power grid and wholesale electricity market. Their goal was to answer a question that has become urgent since trade disputes began threatening tariff measures in early 2025: what actually happens to a power system when governments tax the electrons crossing its borders? Unlike most traded goods, electricity is delivered instantaneously through market-based mechanisms, so trade policy interventions can directly reshape the physical operation of the grid in real time.

The scale of the dependency is substantial. Between 2015 and 2024, Canadian imports accounted for 9.89 percent of New York State’s total electricity load, with 4.25 percent coming from Ontario and 5.64 percent from Quebec. Net imports from all neighbors typically supplied 10 to 20 percent of the state’s demand. More strikingly, in 0.02 percent of five-minute intervals, instantaneous imports from Ontario and Quebec exceeded 30 percent of New York’s load, peaking at 45 percent, highlighting how rapidly cross-border flows can provide system balancing when conditions tighten. Quebec alone can export up to 2,100 megawatts to New York, and Ontario up to 2,500 megawatts.

The economics of these imports hinge on a simple comparison. Hydro-Quebec’s generation portfolio is approximately 99 percent renewable, dominated by low-cost hydropower that produces virtually no direct emissions, while Ontario’s electricity comes largely from nuclear, hydro and wind, with fossil fuels accounting for only about 12 percent of output in recent years. Because marginal generation within New York is predominantly gas-fired, the price of natural gas largely determines the state’s marginal energy prices. Canadian electricity is therefore often cheaper than the domestic alternative, and its cost advantage tracks natural gas prices closely. When tariffs are layered on top of Canadian bids, that advantage erodes, and the market clears differently.

Using roughly 165 million day-ahead market bidding records from 2015 through 2024, the researchers simulated market outcomes under a tariff-adjusted marginal supply-demand equilibrium model. The results reveal sharp thresholds. When tariffs are applied only to imports from Ontario, the province’s market share collapses to a negligible level once the tariff exceeds roughly 55 percent. When tariffs extend to both Ontario and Quebec, the threshold rises to about 90 percent, reflecting Quebec’s stronger cost advantage from its abundant hydropower. Beyond these thresholds, further tariff increases have little additional effect because the imports have already been effectively priced out of the market.

The welfare consequences are unambiguous. Tariffs raise marginal energy prices, suppress demand among price-sensitive loads, and shift generation toward more expensive in-state fossil plants and substitute imports from PJM and ISO New England. A waterfall decomposition of social welfare shows that while New York generators, substitute exporters and government treasuries collecting tariff revenues all gain, these gains fail to offset the losses borne by consumers and Canadian exporters. The net effect is a deadweight loss from the destruction of mutually beneficial trade. Notably, the study finds that during periods of elevated natural gas prices, Canadian imports remain competitive even under extreme tariffs. In early 2015 and 2022, approximately 70 percent of baseline Canadian imports persisted even under a hypothetical 100 percent tariff, because the alternatives were simply more expensive.

The climate implications are equally troubling. New York’s Climate Leadership and Community Protection Act requires 70 percent renewable electricity by 2030 and a zero-emission grid by 2040, and low-carbon Canadian imports contribute directly to that trajectory. Each megawatt-hour displaced from Canadian imports is effectively replaced by higher-emission generation within the United States, since marginal generation in New York, PJM and ISO New England is predominantly fossil-fuelled. The study’s emissions accounting shows that tariffs increase CO2-equivalent emissions across the interconnected U.S. systems while simultaneously raising power purchase costs, meaning the tariff scenarios are economically and environmentally dominated by the tariff-free baseline on both counts.

Reliability emerges as perhaps the most underappreciated casualty. In summer stress tests covering the 100 most severe peak-load days, curtailing Canadian imports reduced reserve margins and forced greater reliance on oil-fired peaker plants in New York City and Long Island, units that historically operate infrequently and carry high costs. The geography matters: Quebec’s high-voltage interties feed directly into transmission-constrained downstate load centers, so when Hydro-Quebec exports decline, deficits emerge inside those zones with limited scope for replacement imports. Ontario’s interties, by contrast, connect mainly to upstate New York, where backflows from PJM allow more flexible reallocation.

Winter tells an even starker story. Simulating contingencies based on Winter Storm Elliott of December 2022, which caused load shedding across the Eastern Interconnection through freezing issues, fuel shortages and equipment failures, the researchers ran 200 Monte Carlo simulations per gas-unit fault-rate level, from 30 to 60 percent. Their results show that full, real-time-responsive electricity support from Canada raises the tolerable gas-generator failure rate before load shedding begins from 40 percent to 55 percent. Complete suspension of Canadian imports increases expected unserved energy, load-deficit hours and reserve-deficit hours. In a warming but still winter-vulnerable grid facing growing electricity demand from artificial intelligence data centers, that margin of resilience carries real value.

The findings also cast a shadow over long-term infrastructure investment. Quebec’s hydropower reservoirs function as a giant dispatchable energy-storage system with an estimated capacity of 175.5 terawatt-hours, flexibility that could support wind and solar integration in New York far more cheaply than building equivalent in-state storage. But projects like the 1,250-megawatt, roughly 6-billion-dollar Champlain Hudson Power Express, which entered commercial operation in May 2026 connecting Quebec to New York City under tariff-free assumptions, face eroded revenue certainty if tariffs are introduced after the fact. The authors suggest that governments could provide guarantees or insurance mechanisms to mitigate trade-policy risk, and that a bilateral energy security protocol requiring consultation with system operators before imposing restrictions would help preserve the mutual support that interconnected grids provide. For jurisdictions pursuing decarbonization, the message is blunt: penalizing low-carbon, flexible Canadian imports shifts dispatch toward higher-cost, more carbon-intensive domestic resources, working directly against climate targets while making the grid less reliable and more expensive to run.

Subject of Research: Economic, emissions and reliability impacts of cross-border electricity tariffs on the New York power system

Article Title: Cross-border electricity tariffs undermine power system efficiency, decarbonization and reliability in North America

Article References: Wang, S., & You, F. (2026). Cross-border electricity tariffs undermine power system efficiency, decarbonization and reliability in North America. Nature Communications, 17(1), Article 9696. https://doi.org/10.1038/s41467-026-77773-w

Image Credits: AI Generated

DOI: 10.1038/s41467-026-77773-w

Keywords: electricity tariffs, cross-border electricity trade, New York power grid, NYISO, Canadian hydropower, grid reliability, carbon emissions, decarbonization, energy policy, power system simulation, Winter Storm Elliott, reserve margins