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Potential gains from trading bad outputs: The case of U.S. electric power plants

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  • Färe, Rolf
  • Grosskopf, Shawna
  • Pasurka, Carl A.

Abstract

Jointly with kilowatt-hours (kWh), electric power plants also produce CO2, NOx, and SO2. In this paper, we apply an environmental production model based on data envelopment analysis (DEA) to compare the production of kWh under command-and-control regulation of the undesirable byproduct with tradable permit regulation of the byproduct. This is done for each of the three undesirable outputs and combinations of them. We apply our model to a dataset of 80 coal-fired electric power plants from 1995 to 2005. From this we can identify the potential gains from trading the most common undesirable outputs produced by coal-fired electric power plants.

Suggested Citation

  • Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2014. "Potential gains from trading bad outputs: The case of U.S. electric power plants," Resource and Energy Economics, Elsevier, vol. 36(1), pages 99-112.
  • Handle: RePEc:eee:resene:v:36:y:2014:i:1:p:99-112
    DOI: 10.1016/j.reseneeco.2013.11.004
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    References listed on IDEAS

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    1. repec:eee:enepol:v:123:y:2018:i:c:p:8-18 is not listed on IDEAS
    2. Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2016. "Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings," Omega, Elsevier, vol. 63(C), pages 48-59.
    3. repec:eee:enepol:v:107:y:2017:i:c:p:258-277 is not listed on IDEAS
    4. Wei, Chu & Löschel, Andreas & Liu, Bing, 2015. "Energy-saving and emission-abatement potential of Chinese coal-fired power enterprise: A non-parametric analysis," Energy Economics, Elsevier, vol. 49(C), pages 33-43.
    5. Silva, Felipe & Fulginiti, Lilyan & Perrin, Richard, 2016. "Trade-off between amazon forest and agriculture in Brazil – shadow price and their substitution estimative for 2006," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235800, Agricultural and Applied Economics Association.
    6. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl, 2016. "Technical change and pollution abatement costs," European Journal of Operational Research, Elsevier, vol. 248(2), pages 715-724.
    7. Zuoren Sun & Rundong Luo & Dequn Zhou, 2015. "Optimal Path for Controlling Sectoral CO 2 Emissions Among China’s Regions: A Centralized DEA Approach," Sustainability, MDPI, Open Access Journal, vol. 8(1), pages 1-20, December.
    8. repec:spr:annopr:v:255:y:2017:i:1:d:10.1007_s10479-015-2020-4 is not listed on IDEAS
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    10. Wang, H. & Ang, B.W. & Wang, Q.W. & Zhou, P., 2017. "Measuring energy performance with sectoral heterogeneity: A non-parametric frontier approach," Energy Economics, Elsevier, vol. 62(C), pages 70-78.
    11. Sueyoshi, Toshiyuki & Yuan, Yan & Goto, Mika, 2017. "A literature study for DEA applied to energy and environment," Energy Economics, Elsevier, vol. 62(C), pages 104-124.
    12. Wang, Qunwei & Chiu, Yung-Ho & Chiu, Ching-Ren, 2015. "Driving factors behind carbon dioxide emissions in China: A modified production-theoretical decomposition analysis," Energy Economics, Elsevier, vol. 51(C), pages 252-260.
    13. repec:spr:nathaz:v:87:y:2017:i:3:d:10.1007_s11069-017-2826-2 is not listed on IDEAS
    14. Agee, Mark D. & Atkinson, Scott E. & Crocker, Thomas D. & Williams, Jonathan W., 2014. "Non-separable pollution control: Implications for a CO2 emissions cap and trade system," Resource and Energy Economics, Elsevier, vol. 36(1), pages 64-82.
    15. repec:spr:empeco:v:54:y:2018:i:1:d:10.1007_s00181-016-1219-9 is not listed on IDEAS
    16. Zhou, Yishu & Huang, Ling, 2016. "Have U.S. power plants become less technically efficient? The impact of carbon emission regulation," Energy Economics, Elsevier, vol. 58(C), pages 105-115.
    17. repec:eee:eneeco:v:74:y:2018:i:c:p:310-320 is not listed on IDEAS
    18. repec:eee:ejores:v:269:y:2018:i:1:p:24-34 is not listed on IDEAS
    19. Mekaroonreung, Maethee & Johnson, Andrew L., 2014. "A nonparametric method to estimate a technical change effect on marginal abatement costs of U.S. coal power plants," Energy Economics, Elsevier, vol. 46(C), pages 45-55.
    20. repec:gam:jsusta:v:8:y:2015:i:1:p:28:d:61444 is not listed on IDEAS

    More about this item

    Keywords

    Joint production; Weak disposability; Tradable permits;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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