Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme
This paper addresses the effects of emissions policy on the ability of electricity generating firms to operate at minimum cost. More specifically, we analyze the impact of the tradable SO2 permit scheme established by the Clean Air Act Amendments of 1990 in the US on the cost efficiency of 37 electr...
| Հիմնական հեղինակ: | |
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| Ձևաչափ: | Working paper |
| Լեզու: | English |
| Հրապարակվել է: |
Oxford Institute for Energy Studies
2008
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| _version_ | 1826300859809529856 |
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| author | Tuthill, L |
| author_facet | Tuthill, L |
| author_sort | Tuthill, L |
| collection | OXFORD |
| description | This paper addresses the effects of emissions policy on the ability of electricity generating firms to operate at minimum cost. More specifically, we analyze the impact of the tradable SO2 permit scheme established by the Clean Air Act Amendments of 1990 in the US on the cost efficiency of 37 electricity generating firms over the years 1990-2004. We estimate a stochastic cost frontier and model the cost inefficiency component as a function of several firm- and policy-specific variables in order to analyze their impact on firm cost efficiency estimates. We find aggregate mean cost efficiency was lower post-regulation and that increases in the capacity factor and coal’s percentage of total capacity were associated with higher firm cost efficiency, while the opposite was true of increases in scrubbed capacity. We find also that inclusion in the SO2 scheme was associated with a reduction in cost efficiency while increased permit prices were linked to cost efficiency improvements. Thus the SO2 scheme appears to have led to a reduction in firms' ability to minimize costs, though cost inefficiencies were recovered at higher permit prices, presumably because of capital constraints and the improved cost effectiveness of scrubbers at higher emissions prices. |
| first_indexed | 2024-03-07T05:23:33Z |
| format | Working paper |
| id | oxford-uuid:dfc25057-bf24-4c29-baf4-df3ef1f88348 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T05:23:33Z |
| publishDate | 2008 |
| publisher | Oxford Institute for Energy Studies |
| record_format | dspace |
| spelling | oxford-uuid:dfc25057-bf24-4c29-baf4-df3ef1f883482022-03-27T09:41:43ZCost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance schemeWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:dfc25057-bf24-4c29-baf4-df3ef1f88348EnglishOxford University Research Archive - ValetOxford Institute for Energy Studies2008Tuthill, LThis paper addresses the effects of emissions policy on the ability of electricity generating firms to operate at minimum cost. More specifically, we analyze the impact of the tradable SO2 permit scheme established by the Clean Air Act Amendments of 1990 in the US on the cost efficiency of 37 electricity generating firms over the years 1990-2004. We estimate a stochastic cost frontier and model the cost inefficiency component as a function of several firm- and policy-specific variables in order to analyze their impact on firm cost efficiency estimates. We find aggregate mean cost efficiency was lower post-regulation and that increases in the capacity factor and coal’s percentage of total capacity were associated with higher firm cost efficiency, while the opposite was true of increases in scrubbed capacity. We find also that inclusion in the SO2 scheme was associated with a reduction in cost efficiency while increased permit prices were linked to cost efficiency improvements. Thus the SO2 scheme appears to have led to a reduction in firms' ability to minimize costs, though cost inefficiencies were recovered at higher permit prices, presumably because of capital constraints and the improved cost effectiveness of scrubbers at higher emissions prices. |
| spellingShingle | Tuthill, L Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title | Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title_full | Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title_fullStr | Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title_full_unstemmed | Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title_short | Cost efficiency and environmental policy in US electricity generation : the case of the tradable SO2 allowance scheme |
| title_sort | cost efficiency and environmental policy in us electricity generation the case of the tradable so2 allowance scheme |
| work_keys_str_mv | AT tuthilll costefficiencyandenvironmentalpolicyinuselectricitygenerationthecaseofthetradableso2allowancescheme |