Environmental performance and equilibrium

Thierry BRECHET and Philippe Michel

No 2004072, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Firms' or industries' ranking in terms of environmental performance may be influenced by equilibrium and not only by ex ante technological characteristics. We adopt a natural definition of relative eco-efficiency between two industries operating withinthe same environmental constraint: the more eco-efficient one is the one that has the higher output level. We compare the relative eco-efficiency of two technologies characterizing two industries, and then of two firms within the same industry. Weshow that all these comparisons depend, through the equilibrium, on the environmental constraint imposed at the industry level. We also show that firm's profitability at the equilibrium depends on its eco-efficiency, but also on its labour elasticity and permits allocation: the more eco-efficient firm is not necessarily the more profitable one.

Keywords: eco-efÞciency; benchmarking; tradable permits (search for similar items in EconPapers)
JEL-codes: D20 Q50 (search for similar items in EconPapers)
Date: 2004-10-01
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Journal Article: Environmental performance and equilibrium (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cor:louvco:2004072

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