Tradable permits and unrealized gains from trade

With the advent of tradable permit programs for bad outputs (e.g., SO₂ emissions); concerns arose over whether the theoretical gains from trade would be realized. We will employ a methodology that calculates the potential gains accruing to coal-fired electric power plants from implementing a tradable permit program. The magnitude of the potential gains in a plant's kilowatt hour output from a tradable permit program relative to its observed production provides insights into the existence of intertemporal allocative inefficiencies and spatial allocative inefficiencies after the implementation of a tradable permit program.KEYWORDS: SO₂ emissions, Joint production model, Tradable permitsThis is the publisher’s final pdf. The published article is copyrighted by Elsevier and can be found at: http://www.journals.elsevier.com/energy-economics

Substitutability among undesirable outputs

In recent years, economists have started to move beyond calculating regulatory effects on a pollutant-by-pollutant basis since their interaction is important. In this study, we take up this issue. To allow for joint production of multiple pollutants and marketable output, we specify our technology using a directional distance function. This allows us to treat pollutants as joint outputs, yet accounts for their ‘undesirability’. We estimate the distance function for a sample of coal-fired electric power plants from 1985 to 1998, which includes the first 4 years of Phase I of the Clean Air Act Amendments of 1990. We focus on the interaction between SO₂ and NOₓ , as they became more highly regulated and estimate shadow prices of the pollutants and the Morishima elasticity of transformation between two pollutants, NOₓ and SO₂, as well as with respect to the desirable output, kilowatt-hours of electricity. As expected, we find that power plants increase NOₓ emissions as they decrease SO₂, i.e. they are substitutes

The Good, the Bad and the Efficient : Productivity, efficiency and technical change in the Airline Industry, 2004:2008

This study models the joint production of desirable and undesirable output production (that is, CO2 emissions) of airlines. The Malmquist-Luenberger productivity index is employed to measure productivity growth when undesirable output production is regulated and unregulated. The results show that pollution abatement activities of airlines lowers productivity growth which suggests the traditional approach of measuring productivity growth, which ignores CO2 emissions, overstate "true" productivity growth

Ex Ante Costs vs. Ex Post Costs of the Large Municipal Waste Combustor Rule

This paper compares EPA’s ex ante cost analysis of the large municipal waste combustor (MWC) rule to an ex post assessment of its cost. For our analysis of the MWC rule, we use plant-level data from the U.S. Department of Energy annual survey of pollution abatement expenditures by steam-electric power plants and from a survey of municipal waste combustor plants compiled by Government Advisory Associates. We find the ex post capital expenditures for nitrogen oxides control systems are typically lower than the EPA ex ante estimates, while ex post capital expenditures for mercury control systems tend to be higher than the EPA ex ante estimates. Finally, the comparison of ex post capital expenditures for particulate and sulfur dioxide control to ex ante capital costs are mixed. While a few plants are outliers when comparing the ratio of ex post capital costs to ex ante capital, the mean of the comparison across plants is near unity

Least-Cost Air Pollution Control: A CGE Joint Production Framework

Abstract This study proposes a new, more flexible approach to modeling pollution abatement activities within the CGE framework, one that treats the problem as an issue of the joint production of "good" and "bad" outputs. More specifically, this study employs a joint production technology to derive the production possibilities frontier for those industries producing both "good" and "bad" outputs. This avoids some of the difficulties associated with attempting to model separate technologies for production of the good output and pollution abatement activities. We demonstrate an application of the CGE model by estimating the cost associated with not pursuing least-cost strategies for abating air pollutants in the United States. 1 Throughout this study, the "good" output is the marketed output produced by an industry and the "bad" outputs are pollutants emitted by an industry

FäreRolfEconomicsTradablePermitsUnrealized.pdf

With the advent of tradable permit programs for bad outputs (e.g., SO₂ emissions); concerns arose over whether the theoretical gains from trade would be realized. We will employ a methodology that calculates the potential gains accruing to coal-fired electric power plants from implementing a tradable permit program. The magnitude of the potential gains in a plant's kilowatt hour output from a tradable permit program relative to its observed production provides insights into the existence of intertemporal allocative inefficiencies and spatial allocative inefficiencies after the implementation of a tradable permit program.Keywords: Joint production model, Tradable permits, SO₂ emission

Accounting for Air Pollution Emissions in Measures of State Manufacturing Productivity Growth

A Malmquist-Luenberger productivity index is employed to account for both marketed output and the output of pollution abatement activities of U.S. state manufacturing sectors for -1986. The index allows us to decompose the change in productivity into measures of change in efficiency and technical change. By accounting for the change in emissions, average annual productivity growth is 3.6 percent, whereas it is 1.7 percent when emissions are ignored. We also find adjusted productivity growth improved after 1977, and "Frost Belt" states with rapidly growing manufacturing sectors have significantly higher rates of productivity growth than "Sun Belt" states with slow growing manufacturing sectors. Copyright 2001 Blackwell Publishers

Do Environmental Regulations Disproportionately Affect Small Businesses? Evidence from the Pollution Abatement Costs and Expenditure Survey

This paper examines whether the impact of environmental regulations differs by the size of the business. We consider the net effect of statutory, enforcement, and compliance asymmetries by estimating the relationship between plant size and pollution abatement expenditures, using establishment-level data on U.S. manufacturers from the Census Bureau’s Pollution Abatement Costs and Expenditures (PACE) survey and from its Annual Survey of Manufactures and Census of Manufactures. We model establishments’ pollution abatement operating costs (PAOC) per unit of economic activity as a function of establishment size, industry, state, and year. Our results show that PAOC intensity increases with establishment and firm size