Approximating pollution abatement costs via alternative specifications of a multi-output production technology: a case of the US electric utility industry

Using a panel of observations from the US electric utility industry, we analyze the output set frontiers that are produced by modeling the technology with different functional forms. Our specifications rely on a series of mapping regimes, based on the paths in which the outputs are scaled toward the frontier, and their outcomes are assessed against the general axiomatic framework of the production model. We demonstrate that different parameterization methodologies produce different empirical analogues of the output set and, as a consequence, can generate rather different estimates of the shadow prices of socially undesirable outputs, or 'bads,' as well. We benchmark our results by assessing the shadow price estimates, often interpreted as the opportunity cost of pollution reduction, against the market prices of pollution permits. The outcomes of our analysis suggest that the estimate of the output set boundary varies with the choice of a parameterization technique, which provides a possible explanation for the sizeable differences between the shadow prices of bads reported in the literature. We also demonstrate that among a variety of existing parametric methodologies no single technique is superior to all others.     

What is driving the EU burden-sharing agreement: Efficiency or equity?

Under the Kyoto Protocol the European Union agreed to reduce emissions of greenhouse gases by 8 percent. The Burden-Sharing Agreement (BSA) redistributes the reduction target among the member states. The purpose of this paper is to evaluate the BSA. To determine if cost efficiency was considered, marginal abatement costs (MACs) are first calculated based on an estimation of the directional output distance function using country production data for 1990-2000. MACs, together with equity indicators, are then regressed on the emission change targets. The main conclusion is that both efficiency and equity were important aspects considered in the settlement.     

POTENTIAL WATER USE AND AGRICULTURAL PRODUCTION PATTERNS UNDER ALTERNATIVE WATER PRICES1

Out study deals with the demand for water and alternative agricultural production and land use patterns under varying prices for both surface and ground water. We derive irrigation water demands for both the United States and regions of it. Not only is a different amount of water used at each set of water prices but also a different mix of crops, livestock, and production technology develops among the different regions. Under the highest set of prices used, more than fourteen million acres are converted into dryland farming. Total irrigated water use decreases by more than 25 million acre-feet. Irrigated crop yields are reduced and cropping patterns shift away from irrigation. Commodity shadow prices increase as much as 15 percent under high prices for both surface and ground water. A redistribution of farm income occurs between irrigated and dryland regions.     

PROJECTED EFFECTS OF ENERGY POLICIES ON AGRICULTURAL WATER USE AND IRRIGATION1

ABSTRACT: A national and interregional programming model was used in projecting the impacts of alternative energy policies and prices on agricultural production, land use, and irrigation. The alternatives analyzed include (a) natural gas deregulation, (b) natural gas curtailment, (c) doubled energy prices, and (d) tripled energy prices. These alternatives are compared with a base alternative where prices and conditions are at normal levels. Restraints in the model control availability of water, land, nitrogen fertilizers, and energy. Water production functions were used to adjust water use to conform with projected energy prices and policies. Natural gas curtailment would have the largest effect on nitrogen use on irrigated land. Values or shadow prices for lands that remains in irrigation would increase under all of the alternatives because of reduced supply. Increased energy prices generally would increase use of surface water for irrigation and reduce use of ground water due to higher pumping costs. Reductions of 50 percent or more in ground water use would occur in the South Central and Western regions of the United States. Water supply prices increase under all of the alternatives; with the amount varying by regions and the policy or price situation.     

Environmental regulation, productive efficiency and cost of pollution abatement: a case study of the sugar industry in India

In this paper the input distance function is estimated for the Indian Sugar industry under alternative assumptions of weak and strong disposability of bad outputs. The estimated distance function is used to make the estimates of environmental efficiency, Malmquist productivity index and shadow prices of pollutants. The technical efficiency measure estimated under the assumption of weak disposability of bad outputs is utilized to test the Porter hypothesis. Marginal costs of pollution abatement functions are estimated for different pollutants of water. Pollutant specific taxes are computed using the tax-standards method.     

The shadow price of substitutable sulfur in the US electric power plant: a distance function approach

Given restrictions on sulfur dioxide emissions, a feasible long-run response could involve either an investment in improving boiler fuel-efficiency or a shift to a production process that is effective in removing sulfur dioxide. To allow for the possibility of substitution between sulfur and productive capital, we measure the shadow price of sulfur dioxide as the opportunity cost of lowering sulfur emissions in terms of forgone capital. The input distance function is estimated with data from 51 coal-fired US power units operating between 1977 and 1986. The indirect Morishima elasticities of substitution indicate that the substitutability of capital for sulfur is relatively high. The overall weighted average estimate of the shadow price of sulfur is -0.076 dollars per pound in constant 1976 dollars.     

Water transfers,agriculture, and groundwater management: a dynamic economic analysis

Water transfers from agricultural to urban and environmental uses will likely become increasingly common worldwide. Many agricultural areas rely heavily on underlying groundwater aquifers. Out-of-basin surface water transfers will increase aquifer withdrawals while reducing recharge, thereby altering the evolution of the agricultural production/groundwater aquifer system over time. An empirical analysis is conducted for a representative region in California. Transfers via involuntary surface water cutbacks tilt the extraction schedule and lower water table levels and net benefits over time. The effects are large for the water table but more modest for the other variables. Break-even prices are calculated for voluntary quantity contract transfers at the district level. These prices differ considerably from what might be calculated under a static analysis which ignores water table dynamics. Canal-lining implies that districts may gain in the short-run but lose over time if all the reduction in conveyance losses is transferred outside the district. Water markets imply an evolving quantity of exported flows over time and a reduction in basin net benefits under common property usage. Most aquifers underlying major agricultural regions are currently unregulated. Out-of-basin surface water transfers increase stress on the aquifer and management benefits can increase substantially in percentage terms but overall continue to remain small. Conversely, we find that economically efficient management can mitigate some of the adverse consequences of transfers, but not in many circumstances or by much. Management significantly reduced the water table impacts of cutbacks but not annual net benefit impacts. Neither the break-even prices nor the canal-lining impacts were altered by much. The most significant difference is that regional water users gain from water markets under efficient management.     

Sustainable value assessment of farms using frontier efficiency benchmarks

Appropriate assessment of firm sustainability facilitates actor-driven processes towards sustainable development. The methodology in this paper builds further on two proven methodologies for the assessment of sustainability performance: it combines the sustainable value approach with frontier efficiency benchmarks. The sustainable value methodology tries to relate firm performance to the use of different resources. This approach assesses contributions to corporate sustainability by comparing firm resource productivity with the resource productivity of a benchmark, and this for all resources considered. The efficiency is calculated by estimating the production frontier indicating the maximum feasible production possibilities. In this research, the sustainable value approach is combined with efficiency analysis methods to benchmark sustainability assessment. In this way, the production theoretical underpinnings of efficiency analysis enrich the sustainable value approach. The methodology is presented using two different functional forms: the Cobb–Douglas and the translog functional forms. The simplicity of the Cobb–Douglas functional form as benchmark is very attractive but it lacks flexibility. The translog functional form is more flexible but has the disadvantage that it requires a lot of data to avoid estimation problems. Using frontier methods for deriving firm specific benchmarks has the advantage that the particular situation of each company is taken into account when assessing sustainability. Finally, we showed that the methodology can be used as an integrative sustainability assessment tool for policy measures.     

Modeling protected species as an undesirable output: the case of sea turtle interactions in Hawaii's longline fishery

Interactions with sea turtles have occurred at an alarming rate in swordfish longlining in Hawaii in recent years and various regulations have been put forward to protect sea turtles. In order to understand the cost of reducing sea turtle interactions, methods have been developed to derive the shadow price of sea turtle bycatch based on fisher's welfare loss from a specific regulation. This paper illustrates an alternative method of calculating temporal and trip-specific cost of sea turtle bycatch reduction. The advantages of this method lie in the computation of shadow price without assuming specific regulation implementation and its relatively modest data requirement. A parametric output distance function is used to simultaneously model desirable and undesirable catches. Using the duality argument, the revenue-related shadow price of sea turtle bycatch can be derived from the estimated distance function. Average shadow price of sea turtle bycatch for the period 1991-1999 is estimated to be US $30873 in 1991 dollars. Average shadow prices of sea turtle bycatch by trip characteristics, such as fishing year, trip type and location are also estimated. Such information can be useful for policy makers to analyze tradeoffs and make appropriate policy decisions.     

Land-use dynamics in a southern Illinois (USA) watershed

The Cache River of southernmost Illinois is used as a case study for developing and demonstrating an approach to quantitatively link (1) national agricultural policy and global agricultural markets, (2) landowner's decisions on land use, (3) spatial patterns of land use at a watershed scale, and (4) hydrologic impacts, thus providing a basis to predict, under a certain set of circumstances, the environmental consequences of economic and political decisions made at larger spatial scales. The heart of the analysis is an estimation, using logistic regression, of the affect of crop prices and Conservation Reserve Program (CRP) rental rates on farmland owner's decisions whether to reenroll in the CRP or return to crop production. This analysis shows that reasonable ranges for crop prices (80%–150% of 1985–1995 values) and CRP rental rates (0–125% of 1985–1995 rates) result in a range of 3%–92% of CRP lands being returned to crop production, with crop prices having a slightly greater effect than CRP rental rates. Four crop price/CRP rental rate scenarios are used to display resulting land-use patterns, and their effect on sediment loads, a critical environmental quality parameter in this case, using the agricultural non point source (AGNPS) model. These scenarios demonstrate the importance of spatial pattern of land uses on hydrological and ecological processes within watersheds. The approach developed can be adapted for use by local governments and watershed associations whose goals are to improve watershed resources and environmental quality.     

Exergoeconomic Environmental Optimization of Piston-Prop Aircraft Engines

In this study, exergy, exergoeconomic, exergoenvironmental analyses, and exergoeconomic environmental optimization are applied to a four-cylinder, spark ignition, naturally aspirated and air-cooled piston-prop aircraft engine in the cruise phase of flight for the first time to the best of the authors` knowledge. Here, three piston-prop aircraft engine parameters (altitude, air–fuel ratio (AF), and rated power setting (PS)) are selected for optimization purposes. All exergy, exergoeconomic, and exergoenvironmental values are calculated first. These values are then optimized to find the best results of all analyses. The best altitude, AF ratio, and PS values are finally found while the maximum exergy efficiency, the minimum product specific environmental impact, and the minimum average unit fuel exergy cost are obtained. The best results of optimization indicated that the maximum exergy efficiency varied between 19.54% and 19.80%, the minimum unit fuel exergy cost ranged from 126.30 $/GJ to 127.23 $/GJ, and the minimum specific environmental impact of production was in the range of 8.70–9.59 mPts/MJ. Based on the results obtained, for ensuring the optimum conditions, the low AF ratios and the low-altitude flight at high rated power settings have to be selected.     

Reuse or Burn? Evaluating the Producer Responsibility of Waste Paper

In 1992, Sweden introduced a producer responsibility ordinance which explicitly states that sorted out, collected waste paper must be material recycled. Another alternative could be to recover energy by incineration. Material recycling was prioritized, although there is no environmental consensus favouring either of the alternatives. By calculating shadow prices of waste paper for the paper industry and for the heating plants, this study tries to determine whether waste paper should be partly incinerated. The study also addresses whether the producer responsibility has contributed to an inefficient allocation of waste paper. The results find no economic support for the producer responsibility.     

Metal prices and the business cycle

Metal price fluctuations have recently been of interest not only because of their cyclical volatility but also of their interaction with business cycles. A related issue is whether metal prices move together sufficiently to collectively reflect macroeconomic influences. Correlation or the tendency for prices to move together has been termed “comovement”, where the commonality in prices reflects the tendency of commodity markets to respond to common business cycle and trend factors. Metal prices are known to respond to macroeconomic influences and the latter might well explain the common factor which causes them to move together. Our goal is to provide an estimate of the common factor in metal prices and to relate this factor to important macroeconomic influences. The prices we study are for aluminum, copper, tin, lead and zinc; the macroeconomic variables include industrial production, consumer prices, interest rates, stock prices, and exchange rates. Our results confirm that the common factor in metal prices can be related to such macroeconomic influences.     

Financial and economic factors affecting the lignite prices in Turkey: An analysis of Soma and Can lignites

Using a simultaneous equation econometric model based on yearly data between 1997 and 2006 for the Aegean Lignite Enterprise this study examines factors that affect the lignite price in Turkey. The Aegean Lignite Enterprise produces and sells the lignite of Soma and Can and their data reflect the general Turkish situation. The results suggest that (1) lignite prices sold to the industry increase (decrease) depending on the decrease (increase) in the industrial production and (2) total electricity production and electricity price are the most important factors that potential investors and related persons have to take into consideration for the pricing of lignite in the thermal power plant market.     

Estimating the volatility of mining projects considering price and operating cost uncertainties

In the real option pricing model of valuation and decision making, the estimation of future volatility is a key input parameter. For traded commodities or financial assets, past volatility is used as a proxy for predictions. But, for projects, this approach is not feasible because, in most cases, historical data of traded projects are not available. As an alternate solution, it is usually assumed that project volatility is equal to that of commodity price. In order to investigate this assumption, we estimate the project volatility considering that both commodity price and operating cost evolve as a geometric Brownian motion (GBM). Results of a hypothetical gold mining project indicate that project volatility is higher than that of commodity price and it only drops to price volatility under very unrealistic industry conditions, such as very high prices or very low production costs. In addition, we find that project volatility is independent of production capacity and taxation, but depends on increments in price and cost, as well as strongly on their degree of correlation.     

Evaluation of different CHP options for refinery integration in the context of a low carbon future

This study presents a comparison of different concepts for delivering combined heat and power (CHP) to a refinery in Norway. A reference case of producing high pressure steam from natural gas in boilers and electricity in a combined cycle power plant, is compared to a: (1) natural gas fueled CHP without any CO₂ capture; (2) hydrogen fueled CHP with hydrogen produced from steam methane reforming (SMR); (3) hydrogen fueled CHP with hydrogen produced from autothermal reforming (ATR); and finally (4) natural gas fueled CHP with postcombustion CO₂ removal. The options are compared on the basis of first law efficiency, emissions of CO₂ and a simplified cash flow evaluation. Results show that in terms of efficiency the standard natural gas fueled CHP performs better than the reference case as well as the options with carbon capture. The low carbon options in turn offer lower emissions of greenhouse gases while maintaining the same efficiency as the reference case. The cash flow analysis shows that for any option, a certain mix of prices is required to produce a positive cash flow. As expected, the relationship between natural gas price and electricity price affects all options. Also the value of heat and CO₂ emissions plays an important role.     

An environmental assessment of food supply chains: a case study on dessert apples

The contemporary food system provides consumers with convenience, extensive choice, and the year-round availability of fresh produce. In this paper these achievements are recognized within the context of the associated environmental impacts. While many analyses have considered the energy and material efficiency of various options for food production and packaging, very few studies have investigated the environmental impacts of the transport components of food supply chains. This is surprising, given that the global sourcing of food produce, centralized distribution systems, and shopping by car have become prevalent in recent decades and have contributed to an increase in the distance between producer and consumer or “food miles.” In a case study the transport energy consumption is calculated for all possible ways in which dessert apples can be supplied to the UK consumer. The aim is to assess the environmental performance of the predominant fresh produce supply chains and to investigate claims that localized systems are more environmentally efficient. The main criteria used to compare the environmental efficiency in alternative food supply chains are the transport-related fossil-fuel energy consumption and associated carbon dioxide emissions. Analysis of the empirical data shows that transportation is now responsible for a considerable fraction of the total energy consumption in the life cycle of fresh apples, and in most cases exceeds the energy consumed in commercial apple cultivation. By developing local production and marketing systems for fresh products, transport demand can be reduced and many of the environmental impacts associated with existing supply chains can be avoided. The results of the study are then discussed in relation to the wider issues of transport policy, international trade, food security, and product-related environmental information for consumers.     

Influence of production costs and inventories on mineral prices

The purpose of this article is to broaden understanding of the factors which exert major influences on prices for industrial metals beyond the widely recognized tendency for prices and inventories to move in opposite directions. Specifically, the relationship between inventory levels and price volatility is examined. In addition, the relationship between prices and production costs is also examined. A few thoughts are expressed on the relationship between prices and industry structure. The paper includes a qualitative discussion about why a link should exist between prices and production costs, a graph illustrating the relationship between prices and inventories, and econometric equations quantifying the relationship between prices, production costs and inventories.     

Impact of the FTSE4Good Index on firm price: an event study

This paper examines whether corporate financial performance is affected by public endorsement of environmental and social performance. Event study methodology, which relies on the notion of market efficiency, is used to examine the relationship between positive and negative announcements and changes in share prices or daily returns. Inclusion in and deletion from the FTSE4Good UK Index is used as a proxy measure for good (poor) corporate social responsibility. The abnormal or unexpected daily returns associated with an event are calculated and their significance tested. The results show a trend towards positive and negative announcements having the expected effects on daily returns. But these movements are not significant and the data do not suggest that a firm's presence on the index brings it any significant financial return for signalling its corporate social responsibility.     

Energy consumption estimation model for dual-motor electric vehicles based on multiple linear regression

ABSTRACT

The drive range of electric vehicle (EV) is one of the major limitations that impedes its universalism. A great deal of research has been devoted to drive range improvement of EV, an accurate and efficiency energy consumption estimation plays a crucial role in these researches. However, the majority of EV’s energy consumption estimation models are based on single motor EV, these models are not suitable for dual-motor EVs, which are composed of more complex transmission mechanisms and multiple operating modes. Thus, an energy consumption estimation model for dual-motor EV is proposed to estimate battery power. This article focuses on studying the operating modes and system efficiency in each operating mode. The limitation of working area of each mode ensures the vehicle dynamic performance, then PSO algorithm is adopted to optimize the torque (speed) distribution between two motors to improve the system efficiency in the coupled driving mode. Finally, the energy consumption estimation model is established by multiple linear regression (MLR). The result shows that the proposed model has a high precision in energy consumption estimation of dual-motor EV.