Decomposing electric power plant emissions within a joint production framework

doi:10.1016/j.eneco.2005.08.002

Energy Economics

Volume 28, Issue 1, January 2006, Pages 26-43

https://doi.org/10.1016/j.eneco.2005.08.002 Get rights and content

Abstract

This study calculates the relative importance of factors associated with changes in NO_x and SO₂ emissions by coal-fired electric power plants between 1987 and 1995 using distance functions to model the joint production of good and bad outputs. This new decomposition model calculates changes in emissions (the bad outputs) associated with changes in technical efficiency, technical change, growth of fuel and non-fuel inputs, and changes in the mix of good and bad outputs. This study finds that declining SO₂ emissions are primarily associated with changes in the output mix, while declining NO_x emissions are associated with declining fuel consumption and changes in the output mix.

Introduction

While it is possible to assess the effectiveness of pollution abatement activities by observing changes in bad output production, a shortcoming of this approach is that factors other than environmental regulations are associated with bad output production.¹ For example, an expanding industry increases its bad output production if it uses a technology that produces a constant mix of good and bad outputs.² Hence, simply observing changes in bad output production may not reveal the effect of pollution abatement activities on bad output production.

This study models the joint production of good and bad outputs and calculates the relative importance of technical change, changes in technical efficiency, changes in fuel consumption, changes in non-fuel inputs, and changes in emission intensity. Because it models a technology in which good and bad outputs are jointly produced and pollution abatement activities other than fuel switching or substituting non-energy inputs for energy inputs exist, this study differs from models specified in previous studies of the factors associated with changes in bad output production. In fact, this study decomposes changes in bad output production in a manner that is comparable to growth accounting studies of the relative importance of factors associated with changes in good output production (i.e., total factor productivity).

The remainder of this study is organized in the following manner. Section 2 surveys previous studies, while Section 3 derives the joint production decomposition model used in this study. Section 4 presents the results and Section 5 summarizes this study and discusses potential extensions.

Section snippets

Previous decomposition studies

This section reviews previous studies of factors associated with changes in bad output production. Studies that assign changes in bad output production to various factors are said to “decompose” these changes. For the purposes of this study, index decomposition (ID) models use annual data to calculate the relative importance of factors associated with changes in bad output production, while structural decomposition analysis (SDA) models are constructed around input–output tables.³

Joint production decomposition model

This section introduces distance functions to model the joint production of good and bad outputs. To accomplish this, technologies that model the joint production of good and bad outputs based on the assumption of weak disposability of the bad outputs are specified.⁶ The weak disposability technology, which assumes the producer may not freely dispose of its bad outputs, can be viewed as the

Data and results

This section discusses the data used to implement the joint production decomposition model and the empirical results. Data from coal-fired power plants from 1985 to 1995 are used to solve the LP problems. The technology modeled in this study consists of one good output, “net electrical generation” (kWh), and two bad outputs—sulfur dioxide (SO₂) and nitrogen oxides (NO_x). The inputs consist of the capital stock, the number of employees, and the heat content (in Btu) of coal, oil, and natural gas

Conclusions

The methodology presented in this study offers an alternative to the ID and SDA techniques that have been used in previous studies of the relative importance of factors associated with changes in emissions. In order to determine the relative importance of changes in technical efficiency, technical change, changes in the output mix, and input growth on the emissions of power plants in the United States between 1987 and 1995, a joint production model was specified. Caution must be exercised when

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^☆: An earlier version of this study was presented at the Western Economic Association meetings in Denver (July 2003). I wish to thank Amanda Lee for helpful comments on an earlier draft of this study, and Curtis Carlson for providing his capital stock and employment data. Any errors, opinions, or conclusions are the author's and should not be attributed to the U.S. Environmental Protection Agency.

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Decomposing electric power plant emissions within a joint production framework☆

Abstract

Introduction

Section snippets

Previous decomposition studies

Joint production decomposition model

Data and results

Conclusions

Energy—The International Journal

Journal of Environmental Management

European Journal of Operational Research

Resources and Energy

Energy Economics

Ecological Economics

Ecological Economics

Sources of emission changes: a joint production perspective of existing decomposition models

Decomposition methodology in energy demand and environmental analysis

Factors behind the environmental Kuznets curve: a decomposition of the changes in air pollution

Environmental and Resource Economics

Sulfur dioxide control by electric utilities: what are the gains from trade?

Journal of Political Economy

Multilateral productivity comparisons when some outputs are undesirable: a nonparametric approach

Review of Economics and Statistics

Production Frontiers

Productivity growth, technical progress and efficiency change in industrialized countries

American Economic Review

Accounting for air pollution emissions in measures of state manufacturing productivity growth

Journal of Regional Science

Some remarks on productivity and its decompositions

Journal of Productivity Analysis