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Have U.S. power plants become less technically efficient? The impact of carbon emission regulation

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  • Zhou, Yishu
  • Huang, Ling

Abstract

We estimate directional distance functions to measure the impact of carbon emission regulation, the Regional Greenhouse Gas Initiative (RGGI) in particular, on U.S. power plants' technical efficiency. The model shows that the average technical efficiency scores for coal and natural gas plants are 88.70% and 83.14% respectively, indicating a very technically efficient industry. We find no evidence of technical efficiency changes due to the RGGI regime in the RGGI area. In the same area, relatively less efficient coal plants exited the market and slightly more efficient natural gas plants entered, compared to the incumbent plants. In addition, some evidence of a spillover effect is found. Using a counterfactual analysis, the RGGI regulation leads to a 1.48% decline in the average technical efficiency for coal plants within neighboring states of RGGI during 2009–2013.

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  • Zhou, Yishu & Huang, Ling, 2016. "Have U.S. power plants become less technically efficient? The impact of carbon emission regulation," Energy Economics, Elsevier, vol. 58(C), pages 105-115.
    • Handle: RePEc:eee:eneeco:v:58:y:2016:i:c:p:105-115
    DOI: 10.1016/j.eneco.2016.06.007
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    Cited by:

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    2. Zhou, Yishu & Huang, Ling, 2021. "How regional policies reduce carbon emissions in electricity markets: Fuel switching or emission leakage," Energy Economics, Elsevier, vol. 97(C).

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    More about this item

    Keywords

    Carbon emission regulations; RGGI; Technical efficiency;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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