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The environment as a factor of production

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Author Info
Considine, Timothy J.
Larson, Donald F.

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Abstract

The authors develop a model of environmental resource use in production with an empirical analysis of how electric power companies consume and bank sulfur dioxide pollution permits. The model considers emissions, fuels, and labor as variable inputs with quasi-fixed inputs of permits and capital. Incorporating information from permit markets allows the authors to distinguish between user costs and asset shadow values. Their findings indicate that firms are holding stocks of pollution permits for reasons other than short-term cost savings. The results also reveal substantial substitution possibilities between emissions, permits stocks, and other factors of production. The authors speculate that anticipated secondary markets for carbon-offset inventories related to the flexibility mechanisms of the Kyoto Protocol will have similar effects for greenhouse-gas emitting firms.

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Publisher Info
Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3271.

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Date of creation: 01 Apr 2004
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Handle: RePEc:wbk:wbrwps:3271

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Keywords: Markets and Market Access Economic Theory&Research Payment Systems&Infrastructure Environmental Economics&Policies Montreal Protocol Environmental Economics&Policies Economic Theory&Research Energy and Environment Carbon Policy and Trading Montreal Protocol

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November. [Downloadable!] (restricted)
  2. Caves, Douglas W & Christensen, Laurits R, 1980. "Global Properties of Flexible Functional Forms," American Economic Review, American Economic Association, vol. 70(3), pages 422-32, June. [Downloadable!] (restricted)
  3. Rubin Jonathan & Kling Catherine, 1993. "An Emission Saved Is an Emission Earned: An Empirical Study of Emission Banking for Light-Duty Vehicle Manufacturers," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 257-274, November. [Downloadable!] (restricted)
  4. Schmalensee, Richard, et al, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer. [Downloadable!] (restricted)
  5. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June. [Downloadable!] (restricted)
  6. Burtraw, Dallas & Lile, Ron, 1998. "State-Level Policies and Regulatory Guidance for Compliance in the Early Years of the SO2 Emission Allowance Trading Program," Discussion Papers dp-98-35, Resources For the Future. [Downloadable!]
  7. Shea, John, 1993. "The Input-Output Approach to Instrument Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 145-55, April.
  8. Kling, Catherine & Rubin, Jonathan, 1997. "Bankable permits for the control of environmental pollution," Journal of Public Economics, Elsevier, vol. 64(1), pages 101-115, April. [Downloadable!] (restricted)
  9. Tietenberg, T H, 1990. "Economic Instruments for Environmental Regulation," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 17-33, Spring.
  10. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future. [Downloadable!]
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  11. Curtis Carlson & Dallas Burtraw & Maureen Cropper & Karen L. Palmer, 2000. "Sulfur Dioxide Control by Electric Utilities: What Are the Gains from Trade?," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1292-1326, December. [Downloadable!] (restricted)
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  12. Arimura, Toshi H., 2002. "An Empirical Study of the SO2 Allowance Market: Effects of PUC Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 271-289, September. [Downloadable!] (restricted)
  13. Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-89, March.
  14. Ellerman, A. Denny & Montero, Juan-Pablo, 1998. "The Declining Trend in Sulfur Dioxide Emissions: Implications for Allowance Prices," Journal of Environmental Economics and Management, Elsevier, vol. 36(1), pages 26-45, July. [Downloadable!] (restricted)
  15. Joskow, Paul L & Schmalensee, Richard, 1998. "The Political Economy of Market-Based Environmental Policy: The U.S. Acid Rain Program," Journal of Law & Economics, University of Chicago Press, vol. 41(1), pages 37-83, April.
  16. Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-97, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. repec:mop:credwp:06.02.63 is not listed on IDEAS
  2. Olivier Rousse & Benoît Sévi, 2005. "Behavioral Heterogeneity in the US Sulfur Dioxide Emissions Allowance Trading Program," ERSA conference papers ersa05p550, European Regional Science Association. [Downloadable!]
  3. Anastasios Xepapadeas & E. Tzouvelekas & D. Vouvaki, 2007. "Total Factor Productivity Growth and the Environment: A Case for Green Growth Accounting," Working Papers 2007.38, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  4. Knut Einar Rosendahl, 2007. "Incentives and quota prices in an emission trading scheme with updating," Discussion Papers 495, Research Department of Statistics Norway. [Downloadable!]
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