Carbon Dioxide Emission Standards for U.S. Power Plants: An Efficiency Analysis Perspective

Benjamin Hampf and Kenneth Løvold Rødseth

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: On June 25, 2013, President Obama announced his plan to introduce carbon dioxide emission standards for electricity generation. This paper proposes an efficiency analysis approach that addresses which mission rates (and standards) would be feasible if the existing generating units adopt best practices. A new efficiency measure is introduced and further decomposed to identify different sources’ contributions to emission rate improvements. Estimating two Data Envelopment Analysis (DEA) models - the well-known joint production model and the new materials balance model - on a dataset consisting of 160 bituminous-fired generating units, we find that the average generating unit’s electricity-to-carbon dioxide ratio is 15.3 percent below the corresponding best-practice ratio. Further examinations reveal that this discrepancy can largely be attributed to non-discretionary factors and not to managerial inefficiency. Moreover, even if the best practice ratios could be implemented, the generating units would not be able to comply with the EPA’s recently proposed carbon dioxide standard.

Date: 2014-02-05
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Published in Darmstadt Discussion Papers in Economics 219 (2014-02-05)

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