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Potential gains from trading bad outputs: The case of U.S. electric power plants

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  • Färe, Rolf
  • Grosskopf, Shawna
  • Pasurka, Carl A.

Abstract

Jointly with kilowatt-hours (kWh), electric power plants also produce CO2, NOx, and SO2. In this paper, we apply an environmental production model based on data envelopment analysis (DEA) to compare the production of kWh under command-and-control regulation of the undesirable byproduct with tradable permit regulation of the byproduct. This is done for each of the three undesirable outputs and combinations of them. We apply our model to a dataset of 80 coal-fired electric power plants from 1995 to 2005. From this we can identify the potential gains from trading the most common undesirable outputs produced by coal-fired electric power plants.

Suggested Citation

  • Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2014. "Potential gains from trading bad outputs: The case of U.S. electric power plants," Resource and Energy Economics, Elsevier, vol. 36(1), pages 99-112.
    • Handle: RePEc:eee:resene:v:36:y:2014:i:1:p:99-112
    DOI: 10.1016/j.reseneeco.2013.11.004
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    References listed on IDEAS

    as
    1. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," Economic Research Papers 271176, University of Warwick - Department of Economics.
    2. Burtraw, Dallas & Krupnick, Alan & Palmer, Karen & Paul, Anthony & Toman, Michael & Bloyd, Cary, 2003. "Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 650-673, May.
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    More about this item

    Keywords

    Joint production; Weak disposability; Tradable permits;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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