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Time substitution for environmental performance: The case of Sweden manufacturing

Author

Listed:
  • Bostian, Moriah

    (Department of Economics, Lewis & Clark College)

  • Färe, Rolf

    (Department of Economics, Oregon State University)

  • Grosskopf, Shawna

    (CERE and Department of Economics, Oregon State University)

  • Lundgren, Tommy

    (CERE)

  • Weber, William L.

    (Department of Economics and Finance, Southeast Missouri State University)

Abstract

We apply recent advances in time substitution modeling to examine the environmental performance of firms in Sweden’s pulp and paper industry for the years 2002 - 2008. Our data allow us to estimate the optimal reallocation of environmental investments, expenditures and energy use to simultaneously maximize production output and minimize emissions reductions in the years immediately before and after the implementation of the European Union Emissions Trading Scheme. We find some evidence of overall productivity decline when considering both emissions and output objectives, due primarily to technological decline, and that cumulative dynamic inefficiency outweighs static inefficiency. A comparison of optimal investment time paths to observed investment levels indicates that firms could have improved their performance by reallocating environmental investments to early periods and production-oriented investment to later periods.

Suggested Citation

  • Bostian, Moriah & Färe, Rolf & Grosskopf, Shawna & Lundgren, Tommy & Weber, William L., 2016. "Time substitution for environmental performance: The case of Sweden manufacturing," CERE Working Papers 2016:3, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2016_003
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    File URL: http://www.cere.se/documents/wp/2016/CERE_WP2016-3.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Time Substitution; Dynamic Efficiency; Environmental Performance; Environmental Investment; DEA;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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