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Analyzing Interplant Marginal Abatement Cost Differences: A Directional Output Distance Function Approach


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  • Marklund, Per-Olov

    (Department of Economics, Umeå University)

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    The purpose of this paper is to compute and evaluate producers’ marginal abatement costs (MACs). These costs are obtained by calculating shadow prices of bad outputs from the production technology, which is represented by the estimated directional output distance function. To be more specific, this paper considers the Swedish pulp industry when the regulatory authority has granted each producing plant a maximally allowed emission level. In each case, area residents and other parties concerned have been allowed to express their views, which possibly prepared the way for other factors than prescribed by environmental law, to influence the stringency of the finally allowed emission levels and, therefore, the MACs. The main focus is on whether the calculated MACs reveal that differences between counties in, e.g., economical characteristics, were influential when the authority, during 1983-1990, restricted 12 geographically scattered pulp plants regarding emissions. The result indicates that the MACs vary between many of the plants and that county differences were taken into account when imposing environmental restrictions on the plants.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 618.

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    Length: 36 pages
    Date of creation: 16 Dec 2003
    Date of revision:
    Handle: RePEc:hhs:umnees:0618

    Contact details of provider:
    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Related research

    Keywords: bad output; environmental regulation; marginal abatement cost; shadow price; parametric directional output distance function;

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    Cited by:
    1. Huhtala, Anni & Marklund, Per-Olov, 2005. "Incorporating environmental impacts into value added from organic and conventional farming," 2005 Annual meeting, July 24-27, Providence, RI 19259, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Huhtala, Anni & Marklund, Per-Olov, 2005. "Environmental Targets and Shadow Prices of Bad Outputs in Organic and Conventional Farming," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24575, European Association of Agricultural Economists.


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