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Centralised reallocation of emission permits using DEA

  • Lozano, S.
  • Villa, G.
  • Brännlund, R.
Registered author(s):

    In this paper a data envelopment analysis (DEA) approach to the problem of emission permits reallocation is presented. It can be used with conventional command and control as well as with an allowance market. It uses a centralized point of view, which represents the common good. In the model it is assumed that firms produce two types of outputs: desirable outputs (i.e. good outputs with positive value for consumers) and undesirable outputs (i.e. bad outputs with negative value for consumers, such as emissions of pollutants). The proposed approach has three phases, which correspond to three objectives that are pursued lexicographically. The three objectives are maximizing aggregated desirable production, minimizing undesirable total emissions and minimizing the consumption of input resources. The relative priority of these objectives is defined by the regulator. The whole approach is units-invariant and does not require information on input and output prices. The approach is applied on a dataset from the Swedish pulp and paper industry.

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    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 193 (2009)
    Issue (Month): 3 (March)
    Pages: 752-760

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    Handle: RePEc:eee:ejores:v:193:y:2009:i:3:p:752-760
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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    6. 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.
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    16. Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
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