Joint environmental and cost efficiency analysis of electricity generation
Fossil-fuel based electricity generation produces the largest proportion of human-related carbon pollution in the United States. Hence, fuel choices by steam plants are key determinants of the industry's impact on national and global greenhouse gas emissions, and key foci for climate change policy. Yet, little research has been done to examine the economic and environmental tradeoffs among the different types of fuels that are used by these plants. This paper applies a Data Envelopment Analysis procedure that incorporates the materials balance principle to estimate the allocations of coal, gas and oil inputs that minimize carbon emissions and costs. Using EIA 906 and FERC 423 data, the paper estimates cost/carbon tradeoffs facing two sets of plants: those that use coal and gas inputs, and those that use coal, gas and oil inputs. Findings for our three-input sample show that there would be a 79% increase in cost for moving from the cost-efficient point to the carbon efficient point, while there would be a 38% increase in carbon for moving from the carbon efficient point to the cost-efficient point. These conclusions indicate that, in general, the gap between efficient cost and efficient environmental production is wide, and would require substantial policy intervention, technological change or market adjustment before it could be narrowed. However, our examination of individual plants shows that what is true in general is often not true for specific plants. Some plants that are currently less efficient than those on the production frontier could produce the same amount of electricity with less carbon output and less fuel input. Additionally, many plants on the production frontier could improve both cost and carbon efficiency by changing their mixture of fossil-fuel inputs.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- 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.
- Soderholm, Patrik & Sundqvist, Thomas, 2003. "Pricing environmental externalities in the power sector: ethical limits and implications for social choice," Ecological Economics, Elsevier, vol. 46(3), pages 333-350, October.
- Lozano, Sebastián & Gutiérrez, Ester, 2008. "Non-parametric frontier approach to modelling the relationships among population, GDP, energy consumption and CO2 emissions," Ecological Economics, Elsevier, vol. 66(4), pages 687-699, July.
- Kuosmanen, Timo & Kortelainen, Mika, 2007.
"Valuing environmental factors in cost-benefit analysis using data envelopment analysis,"
Elsevier, vol. 62(1), pages 56-65, April.
- Timo Kuosmanen, 2006. "Valuing Environmental Factors in Cost-Benefit Analysis Using Data Envelopment Analysis," Working Papers 2006.96, Fondazione Eni Enrico Mattei.
- Zhou, P. & Ang, B.W. & Poh, K.L., 2006. "Slacks-based efficiency measures for modeling environmental performance," Ecological Economics, Elsevier, vol. 60(1), pages 111-118, November.
- Darold Barnum & John Gleason, 2008. "Bias and precision in the DEA two-stage method," Applied Economics, Taylor & Francis Journals, vol. 40(18), pages 2305-2311.
- Camarero, Mariam & Picazo-Tadeo, Andrés J. & Tamarit, Cecilio, 2008. "Is the environmental performance of industrialized countries converging? A 'SURE' approach to testing for convergence," Ecological Economics, Elsevier, vol. 66(4), pages 653-661, July.
- Burnett, Royce D. & Hansen, Don R., 2008. "Ecoefficiency: Defining a role for environmental cost management," Accounting, Organizations and Society, Elsevier, vol. 33(6), pages 551-581, August.
- Fare, Rolf & Grosskopf, Shawna & Tyteca, Daniel, 1996. "An activity analysis model of the environmental performance of firms--application to fossil-fuel-fired electric utilities," Ecological Economics, Elsevier, vol. 18(2), pages 161-175, August.
- Kumar, Surender, 2006. "Environmentally sensitive productivity growth: A global analysis using Malmquist-Luenberger index," Ecological Economics, Elsevier, vol. 56(2), pages 280-293, February.
- Zaim, Osman, 2004. "Measuring environmental performance of state manufacturing through changes in pollution intensities: a DEA framework," Ecological Economics, Elsevier, vol. 48(1), pages 37-47, January.
- Munksgaard, Jesper & Christoffersen, Line Block & Keiding, Hans & Pedersen, Ole Gravgard & Jensen, Trine S., 2007. "An environmental performance index for products reflecting damage costs," Ecological Economics, Elsevier, vol. 64(1), pages 119-130, October.
- Scheel, Holger, 2001. "Undesirable outputs in efficiency valuations," European Journal of Operational Research, Elsevier, vol. 132(2), pages 400-410, July.
- Powell, John & Gleason, John & Burton, Jon, 1977. "Power generator scheduling by dynamic programming," European Journal of Operational Research, Elsevier, vol. 1(3), pages 154-160, May.
- Lauwers, Ludwig, 2009. "Justifying the incorporation of the materials balance principle into frontier-based eco-efficiency models," Ecological Economics, Elsevier, vol. 68(6), pages 1605-1614, April.
- Tim Coelli & Ludwig Lauwers & Guido Huylenbroeck, 2007. "Environmental efficiency measurement and the materials balance condition," Journal of Productivity Analysis, Springer, vol. 28(1), pages 3-12, October.
- Zhang, Bing & Bi, Jun & Fan, Ziying & Yuan, Zengwei & Ge, Junjie, 2008. "Eco-efficiency analysis of industrial system in China: A data envelopment analysis approach," Ecological Economics, Elsevier, vol. 68(1-2), pages 306-316, December.
- Fare, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2007. "Pollution abatement activities and traditional productivity," Ecological Economics, Elsevier, vol. 62(3-4), pages 673-682, May.
- Gulli, Francesco, 2006. "Social choice, uncertainty about external costs and trade-off between intergenerational environmental impacts: The emblematic case of gas-based energy supply decentralization," Ecological Economics, Elsevier, vol. 57(2), pages 282-305, May.
- Darold Barnum & John Gleason, 2006. "Biases in technical efficiency scores caused by intra-input aggregation: mathematical analysis and a DEA application using simulated data," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1593-1603.
- Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
- Shaik, Saleem & Helmers, Glenn A. & Langemeier, Michael R., 2002. "Direct And Indirect Shadow Price And Cost Estimates Of Nitrogen Pollution Abatement," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:68:y:2009:i:8-9:p:2336-2343. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.