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Emissions Trading and Profitability: The Swedish Pulp and Paper Industry

Author

Listed:
  • Runar Brännlund
  • Yangho Chung
  • Rolf Färe
  • Shawna Grosskopf

Abstract

The purpose of this paper is to develop models with and without potential emissions trading and to compare industry profits under the two regimes. The model in which emissions trading is permitted is a nonparametric industry frontier model in the spirit of Färe et al. (1992). It is relative to this model that industry profit is computed. This profit is compared to the profit without emissions trading to give an estimate of the potential gains that can be realised by allowing for emissions trading. The model, which is applied to data for the Swedish pulp and paper industry, suggests that this industry would have had up to 6% (1%) higher profits in 1989 (1990) if emissions trading had been used instead of individual permits to achieve the same total emissions target. Currently there is no permit trading in this industry so our results only model the potential gains that can be made. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Runar Brännlund & Yangho Chung & Rolf Färe & Shawna Grosskopf, 1998. "Emissions Trading and Profitability: The Swedish Pulp and Paper Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(3), pages 345-356, October.
    • Handle: RePEc:kap:enreec:v:12:y:1998:i:3:p:345-356
    DOI: 10.1023/A:1008285813997
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    1. repec:bla:scandj:v:94:y:1992:i:4:p:599-608 is not listed on IDEAS
    2. Runar Brännlund & Rolf Färe & Shawna Grosskopf, 1995. "Environmental regulation and profitability: An application to Swedish pulp and paper mills," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(1), pages 23-36, July.
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    Cited by:

    1. Sueyoshi, Toshiyuki & Yuan, Yan & Goto, Mika, 2017. "A literature study for DEA applied to energy and environment," Energy Economics, Elsevier, vol. 62(C), pages 104-124.
    2. Lozano, S. & Villa, G. & Brännlund, R., 2009. "Centralised reallocation of emission permits using DEA," European Journal of Operational Research, Elsevier, vol. 193(3), pages 752-760, March.
    3. Alfons Oude Lansink & Arno Van Der Vlist, 2008. "Non‐Parametric Modelling of CO2 Emission Quota," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 487-497, September.
    4. Breen, James P., 2008. "Simulating a Market for Tradable Greenhouse Gas Emissions Permits amongst Irish Farmers," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36770, Agricultural Economics Society.
    5. S Lozano & G Villa, 2010. "DEA-based pre-merger planning tool," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1485-1497, October.
    6. Nielsen, Rasmus, 2012. "Introducing individual transferable quotas on nitrogen in Danish fresh water aquaculture: Production and profitability gains," Ecological Economics, Elsevier, vol. 75(C), pages 83-90.
    7. Hoen, Hans Fredrik & Eid, Tron & Okseter, Petter, 2006. "Efficiency gains of cooperation between properties under varying target levels of old forest area coverage," Forest Policy and Economics, Elsevier, vol. 8(2), pages 135-148, March.
    8. Ángel M. Prieto & José L. Zofío, 2004. "Stock splits: Modelización de la gestión ambiental preventiva mediante estándares," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 43-66, January.
    9. Wang, Ke & Zhang, Xian & Yu, Xueying & Wei, Yi-Ming & Wang, Bin, 2016. "Emissions trading and abatement cost savings: An estimation of China's thermal power industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 1005-1017.
    10. Shawna Grosskopf & Kathy Hayes & Lori Taylor & William Weber, 2015. "Centralized or decentralized control of school resources? A network model," Journal of Productivity Analysis, Springer, vol. 43(2), pages 139-150, April.
    11. Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
    12. Troels Kristensen & Peter Bogetoft & Kjeld Pedersen, 2010. "Potential gains from hospital mergers in Denmark," Health Care Management Science, Springer, vol. 13(4), pages 334-345, December.
    13. Zofio, Jose L. & Prieto, Angel M., 2001. "Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries," Resource and Energy Economics, Elsevier, vol. 23(1), pages 63-83, January.
    14. Lansink, Alfons Oude, 2003. "Technical efficiency and CO2 abatement policies in the Dutch glasshouse industry," Agricultural Economics, Blackwell, vol. 28(2), pages 99-108, March.
    15. Yangho Chung & Rolf Fare, 1995. "Productivity and Undesirable Outputs: A Directional Distance Function Approach," Microeconomics 9511002, University Library of Munich, Germany, revised 09 Nov 1995.
    16. Pascoe, Sean & Tingley, Diana, 2006. "Economic capacity estimation in fisheries: A non-parametric ray approach," Resource and Energy Economics, Elsevier, vol. 28(2), pages 124-138, May.
    17. 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.
    18. Whittaker, Gerald & Confesor Jr., Remegio & Griffith, Stephen M. & Färe, Rolf & Grosskopf, Shawna & Steiner, Jeffrey J. & Mueller-Warrant, George W. & Banowetz, Gary M., 2009. "A hybrid genetic algorithm for multiobjective problems with activity analysis-based local search," European Journal of Operational Research, Elsevier, vol. 193(1), pages 195-203, February.
    19. Song, Malin & An, Qingxian & Zhang, Wei & Wang, Zeya & Wu, Jie, 2012. "Environmental efficiency evaluation based on data envelopment analysis: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4465-4469.
    20. Färe, Rolf & Grosskopf, Shawna & Pasurka,, Carl A., 2013. "Tradable permits and unrealized gains from trade," Energy Economics, Elsevier, vol. 40(C), pages 416-424.
    21. Yiling Zhu & Tong Zhao, 2022. "Exploring the Role of Environmental Regulation and Technological Innovation in Financial Performance: Evidence from Chinese Heavy-Polluting Industry," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    22. Cattaneo, Andrea, 2001. "Environmental Quality Incentives Program: Why Are So Many Contracts Being Cancelled?," 2001 Annual meeting, August 5-8, Chicago, IL 20597, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    More about this item

    Keywords

    emissions trading; environmental regulations; pulp and paper; profit;
    All these keywords.

    JEL classification:

    • P - Political Economy and Comparative Economic Systems
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Z - Other Special Topics

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