Productivity and Profitability Changes in U.S. Electric Utility Plants under the SO2 Allowance System (original) (raw)

Resource Use Efficiency of US Electricity Generating Plants During the SO 2 Trading Regime : A Distance Function Approach

2004

Resource use efficiency is considered as the product of technical and environmental efficiencies. Three methods are used to calculate the resource use efficiency: stochastic frontier analysis, parametric and non-parametric linear programming. The geometric means of three methods for technical efficiency, environmental efficiency and resource use efficiency are 0.737, 0.335 and 0.248, respectively. The regression analyses of performance across plants shows units in phase I of the SO2 trading program suggest that the market for SO2 allowances, per se, may not be minimizing compliance cost. It is found that a decrease in SO2 emission rate not only increases environmental efficiency but also leads to an increase in resource use efficiency. This finding concurs with the hypothesis that enhancement in the environmental performance of a firm leads to an increase in its overall efficiency of resource use as well.

The impact of environmental regulation on productivity: the case of electricity generation under the CAAA-1990

2015

This paper measures the impact of the 1990 Clean Air Act Amendment on productivity and output of US coal-fired boilers. The Act led to power units adopting a number of different pollution abating strategies, one of which was an input change to lower SO2 emitting coal. A key feature is that each boiler is designed to burn a particular variety of coal, with significant deviations from the targeted coal characteristics resulting in productivity loss. The main innovation of the paper is to quantify the effect that switching to cleaner coal had on productivity and output. With data spanning over fifteen years, I incorporate the effect of this deviation directly into a production function to explicitly quantify the resulting productivity loss. Estimated output losses range from 0% to more than 6%, varying across regions, over time, and mainly depending on the proximity of generating units to low-sulfur sources.

Does regulation stimulate productivity? The effect of air quality policies on the efficiency of US power plants

Energy Policy, 2009

This research examines the effect of air quality regulations on the productivity of US power plants based on both economic and environmental outputs. Using data envelopment analysis (DEA) to estimate an efficiency measure incorporating both economic and environmental outcomes, we look at changes in efficiency in US power plants over an eleven-year time period (1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004) during which several different regulations were implemented for the control of nitrogen oxides (NO x ) and sulfur dioxide (SO 2 ). The paper then models how estimated efficiency behaves over time as a function of regulatory changes. Findings suggest mixed effects of regulations on power plant efficiency when pollution abatement and electricity generation are both included as outputs.

Greenhouse Gas Emissions Effect on Cost Efficiencies of U.S. Electric Power Plants

2016

Nonparametric DEA models were ran to estimate cost and production frontiers of 503 electric generation plans in 2012. Preliminary results show that the relaxation of the greenhouse gas emission constraint for the constrained electric generation plants would reduce the cost for all greenhouse gas emissions in the study. However, it was found that when the model accounts for these greenhouse gas emissions as a bad output, the electric generation plants that were constrained were more efficient by most of the efficiency measures. This shows that the inclusion of a pollutant, in this case the greenhouse gas emissions of an electric generation plant, are accounted for in the production process, the efficiency scores and the frontier curves of the plant are affected and must be accounted for.

Environmental regulation and productivity: The case of electricity generation under the CAAA-1990

Energy Economics, 2016

This paper measures the impact of the 1990 Clean Air Act Amendments on coal-fired boilers' productivity and output. The Act led to generating units adopting a number of different pollution abating behaviors, one of which was an input change to lower SO 2 emitting coal. A key feature of the production technology is that each boiler is designed to burn a particular variety of coal, with significant deviations from the targeted coal characteristics resulting in productivity losses. Using data for the 1985-1999 period, I present empirical evidence of the policy impact. The main findings are that productivity declined between 1% and 2.5%, on average, and output losses ranged from 1% to 6% for affected boilers, varying across regions and over time.

Environmental Externalities and Regulation Constrained Cost Productivity

2008

This paper measures and decomposes total factor productivity growth (TFP) for U.S. electric utilities, accounting for the production of multiple outputs, and rate of return regulation. Following the work of Ball et al. (2005), who developed the standard Malmquist Cost Productivity index, we develop the cost index for a rate regulated firm. Comparing the regulated and standard indices helps determine how regulation affects TPF. Using a 1992-2000 panel of 34 investor-owned utilities, empirical results show that technological change, and improvements in technical efficiency, contributed to positive productivity growth. Allocative and scale inefficiency reduced the rate at which productivity growth occurred.

Productivity Effect Evaluation on Market-Type Environmental Regulation: A Case Study of SO2 Emission Trading Pilot in China

International Journal of Environmental Research and Public Health

Taking China’s SO2 emissions trading pilot (ETP) in 2007, a large-scale market-based environmental regulation as its target, this paper reexamines the strong Porter hypothesis by adopting the method of propensity score matching-differences-in-differences. Research shows the following results: first, SO2 ETP which provides high flexibility for enterprises in the process of emission reduction, improves total factor productivity (TFP) significantly on the whole. Second, the productivity effect of market-based environmental regulation varies from the productivity level of enterprise. For example, the SO2 ETP has a significant effect on TFP only at 40–80 percent quantile of TFP, and the effect increases at first and then decreases. Third, the financing constraints and bargaining power of enterprises have significant negative moderating effects on the impact of SO2 ETP on TFP, and the moderating effects between state-owned and non-state-owned enterprises exist heterogeneity. In conclusion...

Adjusting the measurement of US manufacturing productivity for air pollution emissions control

Resource and Energy Economics, 2003

We estimate a distance function and derive producer shadow prices for SO 2 and PM-10 emissions. The shadow prices are used to adjust a traditional measure of total factor productivity growth in order to account for the reallocation of inputs from production of the marketed output to pollution abatement activities. Adjusted total factor productivity growth rates are calculated for the two-digit SIC manufacturing industries in the United States for 1970-1996. The results indicate that including the "output" of pollution abatement activities has a measurable effect on the productivity of many industries in the manufacturing sector.

Efficiency, productivity and environmental policy: A case study of power generation in the EU

Energy Economics, 2012

This study explores whether the European Union's CO 2 Emissions Trading Scheme (EU ETS) could provide incentives for the public power plants responsible for about one third of EU-27 CO 2 emissions, to improve their environmental and productive performance. This paper employs an approach for measuring the overall impact of the EU ETS on the public power plants of the EU member states during 1996-2007. Firstly, it measures environmental efficiency and total factor productivity growth taking into account environmental variables. For this purpose, Data Envelopment Analysis is used as the principle methodological base. Secondly, the impacts of the EU ETS and other variables on the environmental efficiency and productivity indicators are estimated by using econometric techniques. Two findings emerge from this analysis: i) the EU ETS had a positive effect on the environmental efficiency and technical change of the public power plants; however, ii) the looseness of this policy reflected in the overallocation of the grandfathered permits led to the deteriorating performance. JEL Classification: Q41, Q48, Q54, Q58