IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v46y2014icp45-55.html
   My bibliography  Save this article

A nonparametric method to estimate a technical change effect on marginal abatement costs of U.S. coal power plants

Author

Listed:
  • Mekaroonreung, Maethee
  • Johnson, Andrew L.

Abstract

The literature usually assumes that technical change reduces marginal abatement cost; however, recent results suggest that precisely the opposite occurs. This paper proposes a nonparametric method to determine the effect of technical change on marginal abatement cost. The method decomposes NOx marginal abatement cost changes in 2000–2004 and in 2004–2008 for 325 boilers operating in 134 U.S. bituminous coal power plant into technical and non-technical change effects. We find that technical change reduces the NOx marginal cost about 28.3% in 2000–2004 and 26.5% in 2004–2008. However, more stringent regulations enacted the NOx budget program results in lower NOx emission levels as plant operators install more advanced NOx abatement equipment which in turn causes an overall increase in marginal abatement cost.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:eneeco:v:46:y:2014:i:c:p:45-55
    DOI: 10.1016/j.eneco.2014.08.027
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988314002096
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2014.08.027?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
    2. Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
    3. Ray, Subhash C & Desli, Evangelia, 1997. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries: Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1033-1039, December.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    5. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
    6. Timo Kuosmanen & Mogens Fosgerau, 2009. "Neoclassical versus Frontier Production Models? Testing for the Skewness of Regression Residuals," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 351-367, June.
    7. Lee, Chia-Yen & Johnson, Andrew L. & Moreno-Centeno, Erick & Kuosmanen, Timo, 2013. "A more efficient algorithm for Convex Nonparametric Least Squares," European Journal of Operational Research, Elsevier, vol. 227(2), pages 391-400.
    8. Andrew Johnson & Timo Kuosmanen, 2011. "One-stage estimation of the effects of operational conditions and practices on productive performance: asymptotically normal and efficient, root-n consistent StoNEZD method," Journal of Productivity Analysis, Springer, vol. 36(2), pages 219-230, October.
    9. Henry Tulkens & Philippe Eeckaut, 2006. "Nonparametric Efficiency, Progress and Regress Measures For Panel Data: Methodological Aspects," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 395-429, Springer.
    10. Timo Kuosmanen, 2008. "Representation theorem for convex nonparametric least squares," Econometrics Journal, Royal Economic Society, vol. 11(2), pages 308-325, July.
    11. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
    12. Pasurka, Carl Jr., 2006. "Decomposing electric power plant emissions within a joint production framework," Energy Economics, Elsevier, vol. 28(1), pages 26-43, January.
    13. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2010. "Toxic releases: An environmental performance index for coal-fired power plants," Energy Economics, Elsevier, vol. 32(1), pages 158-165, January.
    14. Joe Zhu, 2014. "Data Envelopment Analysis," International Series in Operations Research & Management Science, in: Quantitative Models for Performance Evaluation and Benchmarking, edition 3, chapter 1, pages 1-9, Springer.
    15. 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.
    16. Victoria Shestalova, 2003. "Sequential Malmquist Indices of Productivity Growth: An Application to OECD Industrial Activities," Journal of Productivity Analysis, Springer, vol. 19(2), pages 211-226, April.
    17. Rolf Färe & Shawna Grosskopf & Carl A. Pasurka & William L. Weber, 2012. "Substitutability among undesirable outputs," Applied Economics, Taylor & Francis Journals, vol. 44(1), pages 39-47, January.
    18. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
    19. Bert Balk, 2001. "Scale Efficiency and Productivity Change," Journal of Productivity Analysis, Springer, vol. 15(3), pages 159-183, May.
    20. Johnson, Andrew L. & Kuosmanen, Timo, 2012. "One-stage and two-stage DEA estimation of the effects of contextual variables," European Journal of Operational Research, Elsevier, vol. 220(2), pages 559-570.
    21. Timo Kuosmanen & Andrew L. Johnson, 2010. "Data Envelopment Analysis as Nonparametric Least-Squares Regression," Operations Research, INFORMS, vol. 58(1), pages 149-160, February.
    22. Ray, Subhash C & Mukherjee, Kankana, 1996. "Decomposition of the Fisher Ideal Index of Productivity: A Non-parametric Dual Analysis of US Airlines Data," Economic Journal, Royal Economic Society, vol. 106(439), pages 1659-1678, November.
    23. E. Grifell-Tatjé & C. A. K. Lovell, 1999. "Profits and Productivity," Management Science, INFORMS, vol. 45(9), pages 1177-1193, September.
    24. Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
    25. Rolf Färe & Shawna Grosskopf & Carl Pasurka, 2006. "Social responsibility: U.S. power plants 1985–1998," Journal of Productivity Analysis, Springer, vol. 26(3), pages 259-267, December.
    26. Fare, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2007. "Pollution abatement activities and traditional productivity," Ecological Economics, Elsevier, vol. 62(3-4), pages 673-682, May.
    27. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    28. Vijay, Samudra & DeCarolis, Joseph F. & Srivastava, Ravi K., 2010. "A bottom-up method to develop pollution abatement cost curves for coal-fired utility boilers," Energy Policy, Elsevier, vol. 38(5), pages 2255-2261, May.
    29. Dan Rosen & Claire Schaffnit & Joseph Paradi, 1998. "Marginal Rates and Two-dimensional Level Curves in DEA," Journal of Productivity Analysis, Springer, vol. 9(3), pages 205-232, March.
    30. Baker, Erin & Clarke, Leon & Shittu, Ekundayo, 2008. "Technical change and the marginal cost of abatement," Energy Economics, Elsevier, vol. 30(6), pages 2799-2816, November.
    31. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    32. Mekaroonreung, Maethee & Johnson, Andrew L., 2012. "Estimating the shadow prices of SO2 and NOx for U.S. coal power plants: A convex nonparametric least squares approach," Energy Economics, Elsevier, vol. 34(3), pages 723-732.
    33. Timo Kuosmanen & Mika Kortelainen, 2012. "Stochastic non-smooth envelopment of data: semi-parametric frontier estimation subject to shape constraints," Journal of Productivity Analysis, Springer, vol. 38(1), pages 11-28, August.
    34. Diewert, W E, 1980. "Capital and the Theory of Productivity Measurement," American Economic Review, American Economic Association, vol. 70(2), pages 260-267, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristina Polo & Julián Ramajo & Alejandro Ricci‐Risquete, 2021. "A stochastic semi‐non‐parametric analysis of regional efficiency in the European Union," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(1), pages 7-24, February.
    2. Jose M. Cordero & Cristina Polo & Daniel Santín, 2020. "Assessment of new methods for incorporating contextual variables into efficiency measures: a Monte Carlo simulation," Operational Research, Springer, vol. 20(4), pages 2245-2265, December.
    3. Tiziano De Angelis & Peter Tankov & Olivier David Zerbib, 2022. "Climate Impact Investing," Carlo Alberto Notebooks 676 JEL Classification: G, Collegio Carlo Alberto.
    4. Bowen Xiao & Dongxiao Niu & Han Wu & Haichao Wang, 2017. "Marginal Abatement Cost of CO 2 in China Based on Directional Distance Function: An Industry Perspective," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    5. Wei, Xiao & Zhang, Ning, 2020. "The shadow prices of CO2 and SO2 for Chinese Coal-fired Power Plants: A partial frontier approach," Energy Economics, Elsevier, vol. 85(C).
    6. Dai, Sheng & Zhou, Xun & Kuosmanen, Timo, 2020. "Forward-looking assessment of the GHG abatement cost: Application to China," Energy Economics, Elsevier, vol. 88(C).
    7. Zhang, Zibin & Ye, Jianliang, 2015. "Decomposition of environmental total factor productivity growth using hyperbolic distance functions: A panel data analysis for China," Energy Economics, Elsevier, vol. 47(C), pages 87-97.
    8. Kuosmanen, Timo & Zhou, Xun, 2021. "Shadow prices and marginal abatement costs: Convex quantile regression approach," European Journal of Operational Research, Elsevier, vol. 289(2), pages 666-675.
    9. Shirong Zhao & Guangshun Qiao, 2022. "The shadow prices of CO2, SO2 and NOx for U.S. coal power industry 2010–2017: a convex quantile regression method," Journal of Productivity Analysis, Springer, vol. 57(3), pages 243-253, June.
    10. Wu, F. & Wang, S.Y. & Zhou, P., 2023. "Marginal abatement cost of carbon dioxide emissions: The role of abatement options," European Journal of Operational Research, Elsevier, vol. 310(2), pages 891-901.
    11. Song, Malin & Peng, Jun & Wang, Jianlin & Zhao, Jiajia, 2018. "Environmental efficiency and economic growth of China: A Ray slack-based model analysis," European Journal of Operational Research, Elsevier, vol. 269(1), pages 51-63.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eskelinen, Juha & Kuosmanen, Timo, 2013. "Intertemporal efficiency analysis of sales teams of a bank: Stochastic semi-nonparametric approach," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5163-5175.
    2. Lee, Chia-Yen & Wang, Ke, 2019. "Nash marginal abatement cost estimation of air pollutant emissions using the stochastic semi-nonparametric frontier," European Journal of Operational Research, Elsevier, vol. 273(1), pages 390-400.
    3. Kuosmanen, Timo, 2012. "Stochastic semi-nonparametric frontier estimation of electricity distribution networks: Application of the StoNED method in the Finnish regulatory model," Energy Economics, Elsevier, vol. 34(6), pages 2189-2199.
    4. Tsionas, Mike G., 2022. "Convex non-parametric least squares, causal structures and productivity," European Journal of Operational Research, Elsevier, vol. 303(1), pages 370-387.
    5. Lee, Chia-Yen & Johnson, Andrew L. & Moreno-Centeno, Erick & Kuosmanen, Timo, 2013. "A more efficient algorithm for Convex Nonparametric Least Squares," European Journal of Operational Research, Elsevier, vol. 227(2), pages 391-400.
    6. Hampf, Benjamin & Rødseth, Kenneth Løvold, 2019. "Environmental efficiency measurement with heterogeneous input quality: A nonparametric analysis of U.S. power plants," Energy Economics, Elsevier, vol. 81(C), pages 610-625.
    7. Mekaroonreung, Maethee & Johnson, Andrew L., 2012. "Estimating the shadow prices of SO2 and NOx for U.S. coal power plants: A convex nonparametric least squares approach," Energy Economics, Elsevier, vol. 34(3), pages 723-732.
    8. Kenneth Rødseth & Eirik Romstad, 2014. "Environmental Regulations, Producer Responses, and Secondary Benefits: Carbon Dioxide Reductions Under the Acid Rain Program," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 111-135, September.
    9. Wen, Xiaojie & Yao, Shunbo & Sauer, Johannes, 2022. "Shadow prices and abatement cost of soil erosion in Shaanxi Province, China: Convex expectile regression approach," Ecological Economics, Elsevier, vol. 201(C).
    10. Layer, Kevin & Johnson, Andrew L. & Sickles, Robin C. & Ferrier, Gary D., 2020. "Direction selection in stochastic directional distance functions," European Journal of Operational Research, Elsevier, vol. 280(1), pages 351-364.
    11. Valentin Zelenyuk, 2023. "Productivity analysis: roots, foundations, trends and perspectives," Journal of Productivity Analysis, Springer, vol. 60(3), pages 229-247, December.
    12. Xian, Yujiao & Yu, Dan & Wang, Ke & Yu, Jian & Huang, Zhimin, 2022. "Capturing the least costly measure of CO2 emission abatement: Evidence from the iron and steel industry in China," Energy Economics, Elsevier, vol. 106(C).
    13. Wei, Xiao & Zhang, Ning, 2020. "The shadow prices of CO2 and SO2 for Chinese Coal-fired Power Plants: A partial frontier approach," Energy Economics, Elsevier, vol. 85(C).
    14. Lee, Chia-Yen & Cai, Jia-Ying, 2020. "LASSO variable selection in data envelopment analysis with small datasets," Omega, Elsevier, vol. 91(C).
    15. Kuosmanen, Timo & Johnson, Andrew, 2017. "Modeling joint production of multiple outputs in StoNED: Directional distance function approach," European Journal of Operational Research, Elsevier, vol. 262(2), pages 792-801.
    16. Rødseth, Kenneth Løvold, 2023. "Shadow pricing of electricity generation using stochastic and deterministic materials balance models," Applied Energy, Elsevier, vol. 341(C).
    17. Maziotis, Alexandros & Sala-Garrido, Ramon & Mocholi-Arce, Manuel & Molinos-Senante, Maria, 2023. "Cost and quality of service performance in the Chilean water industry: A comparison of stochastic approaches," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 211-219.
    18. Tsionas, Mike G., 2023. "Clustering and meta-envelopment in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 304(2), pages 763-778.
    19. Kenneth Løvold Rødseth, 2017. "Environmental regulations and allocative efficiency: application to coal-to-gas substitution in the U.S. electricity sector," Journal of Productivity Analysis, Springer, vol. 47(2), pages 129-142, April.
    20. Kortelainen, Mika, 2008. "Estimation of semiparametric stochastic frontiers under shape constraints with application to pollution generating technologies," MPRA Paper 9257, University Library of Munich, Germany.

    More about this item

    Keywords

    Multiplicative decomposition; Technical change; Marginal abatement cost; Sequential frontier estimation;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:46:y:2014:i:c:p:45-55. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.