Estimation of environmental efficiencies of economies and shadow prices of pollutants in countries in transition

Mykhaylo Salnykov and Valentin Zelenyuk

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: Various measures of technical efficiency, such as output distance function, input distance function and directional distance function can be used as sustainability indicators in the case when some outputs produced are undesirable, such as pollution. Shadow prices of environmental pollution asses short run perspectives of increase in pollution when desirable output is increased and may serve as a reference value for environmental taxes and prices for international emission trade. We make an attempt to estimate environmental efficiencies of countries (based on the output distance function with general directional vector) as well as shadow prices for selected pollutants (CO2, SO2 and NOx). Two alternative estimation approaches are employed: parametric (Translog specification) and nonparametric (DEA). Statistical characteristics of the obtained parametric estimates are assessed using the smooth homogeneous bootstrap technique. Our results indicate that, on average, countries value pollutants proportionally to their direct impact on human health (i.e. the most hazardous pollutants have the highest shadow prices). We find that in general both rich and poor countries can be fully environmentally efficient, while most of the countries in transition (CITs) turned out to be inefficient. Our findings imply that under emission permit trade agreements CITs will generally be permit sellers. By selling permits they will hamper their future ability of economic growth, thus some restrictions (which we propose) must be made in such agreements to limit their unsustainability for CITs. Our estimates show that currently global wealth and pollution are allocated inefficiently. We determine that different estimation techniques provide with statistically different estimates. The work provides with illustrative examples of using the estimates to draw forecasts on environmental effect of economic growth; to determine price range on international pollution permit markets and to estimate economically justified rates of environmental taxation. Finally, we provide policy implications and outline potential directions for the future studies in the field.

Keywords: Pollution; environmental efficiency; shadow prices; bootstrap; countries in transition; parametric and nonparametric techniques; bootstrap (search for similar items in EconPapers)
JEL-codes: Q56 H23 C67 D24 C15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-env, nep-res and nep-tra
Date: 2005-06-22
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://eerc.ru/default/download/creater/working_p ... 96912d16dea2ba5b.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to eerc.ru:443 (certificate verify failed)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eer:wpalle:05-06e

Ordering information: This working paper can be ordered from
EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
https://eerc.ru/paper

Access Statistics for this paper

More papers in EERC Working Paper Series from EERC Research Network, Russia and CIS
Address: EERC Research Network, Russia and CIS, 13, Yakira Str., suite 332, Kyiv, 04119 Ukraine
Series data maintained by Anton Pashchenko ().