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A theoretical measure of environmental efficiency

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  • P. Michel
  • P.-A. Jouvet
  • Gilles Rotillon

Abstract

We study, in a simple model, the partial equilibrium of an industry with n firms endowed by different technologies which have different pollution effects. The price of input (labour) and the demand curve to the industry are given. Pollution is restricted by a tradable market of permits in the industry. We define an environmental efficiency factor for each firm. Given the total dotation of permits, the larger is the environmental efficiency factor, the larger is the firm's contribution to total production. To study the long run efficiency, we explicit the role of capital in production and obtain a proportional environmental efficiency factor. Last, we analyze the consequences of permits' allocations on the profitability of the firms
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Suggested Citation

  • P. Michel & P.-A. Jouvet & Gilles Rotillon, 2003. "A theoretical measure of environmental efficiency," THEMA Working Papers 2003-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2003-21
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    References listed on IDEAS

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    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. P-A. Jouvet & P. Michel & G. Rotillon, 2002. "Capital Allocation and International Equilibrium with Pollution Permits," THEMA Working Papers 2002-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Stijn Reinhard & C. A. Knox Lovell & Geert Thijssen, 2002. "Analysis of Environmental Efficiency Variation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1054-1065.
    4. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-380, May.
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    8. Noll, Roger G, 1982. "Implementing Marketable Emissions Permits," American Economic Review, American Economic Association, vol. 72(2), pages 120-124, May.
    9. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
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    Cited by:

    1. Jouvet, Pierre-André & Michel, Philippe & Rotillon, Gilles, 2005. "Equilibrium with a market of permits," Research in Economics, Elsevier, vol. 59(2), pages 148-163, June.
    2. Thierry Bréchet & Philippe Michel, 2007. "Environmental performance and equilibrium," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1078-1099, November.

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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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