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Consequences of the IPPC-directive's BAT requirements for abatement costs and emissions

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Abstract

The Integration Pollution and Prevention Control (IPPC) directive from the European Union implies that the regulatory emission caps should be set in accordance with each industry's Best Available Techniques (BAT). The directive is under implementation in Norway, and it represents a refocus of the Norwegian environmental regulations away from economic efficiency towards a BAT principle. We examine the effect of this implementation with respect to expected emission reductions and increases in costs. Data Envelopment Analyses (DEA) is used to construct a frontier of all efficient plants. This provides us with two alternative interpretations of BAT. First, we assume that all the plants emit in accordance with the best practice technology, represented by the frontier, by reducing all inputs proportionally. Second, we assume that all plants emit in accordance with the best practice technology by reducing emissions only. Both interpretations reveal substantial potential for emission reductions. Further, abatement cost estimates indicate that considerable emission reductions can be achieved with low or no social costs, but that the implementation of BAT for all plants involves substantial costs.

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  • Jan Larsson & Kjetil Telle, 2005. "Consequences of the IPPC-directive's BAT requirements for abatement costs and emissions," Discussion Papers 411, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:411
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    1. Annegrete Bruvoll & Torstein Bye & Jan Larsson & Kjetil Telle, 2003. "Technological changes in the pulp and paper industry and the role of uniform versus selective environmental policy," Discussion Papers 357, Statistics Norway, Research Department.
    2. Pearce, David & Brisson, Inger, 1993. "BATNEEC: The Economics of Technology-Based Environmental Standards with a UK Case Illustration," Oxford Review of Economic Policy, Oxford University Press, vol. 9(4), pages 24-40, Winter.
    3. Reinhard, Stijn & Knox Lovell, C. A. & Thijssen, Geert J., 2000. "Environmental efficiency with multiple environmentally detrimental variables; estimated with SFA and DEA," European Journal of Operational Research, Elsevier, vol. 121(2), pages 287-303, March.
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    Keywords

    IPPC; BAT; Emissions; Energy intensive industries; DEA; Technical efficiency; Frontier technology.;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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