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A theoretical measure of environmental efficiency

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Author Info

  • Pierre-André Jouvet

    (GAINS et GREQAM)

  • Philippe Michel

    (GREQAM et EUREQua)

  • Gilles Rotillon

    (THEMA)

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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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v04011.

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Length: 24 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:mse:wpsorb:v04011

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Related research

Keywords: Environmental efficiency factor; environmental performance; indicators; market of permits; undesirable output.;

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References

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  1. Bohm, Peter & Russell, Clifford S., 1985. "Comparative analysis of alternative policy instruments," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 1, chapter 10, pages 395-460 Elsevier.
  2. 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 374-80, May.
  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. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
  5. Noll, Roger G, 1982. "Implementing Marketable Emissions Permits," American Economic Review, American Economic Association, vol. 72(2), pages 120-24, May.
  6. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  7. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-91, December.
  8. 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.
  9. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  10. Cormier, Denis & Magnan, Michel & Morard, Bernard, 1993. "The impact of corporate pollution on market valuation: some empirical evidence," Ecological Economics, Elsevier, vol. 8(2), pages 135-155, October.
  11. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  12. 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.
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Cited by:
  1. BRECHET, Thierry & MICHEL, Philippe, 2004. "Environmental performance and equilibrium," CORE Discussion Papers 2004072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. 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.

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