A quantitative model of regulator’s preference factor (RPF) in electricity–environment coordinated regulation system

Yulong Ren and Shijun Fu

Energy, 2010, vol. 35, issue 12, 5185-5191

Abstract: This paper explores quantification of regulator’s preference factor (RPF) in electricity–environment coordinated regulation system. Based on social welfare economics, we articulately depict RPF’s qualitative concept and its economic meaning. Then, applying abstract functions (i.e., abstract social welfare function, abstract utility function, and abstract production function), we deduce the partial-social-welfare elasticity, and build the mathematics model of maximizing social welfare. We nest this elasticity into the model’s Kuhn–Tucker conditions, and obtain RPF’s definition formula. By solving the Kuhn–Tucker conditions, we get RPF’s quantitative formula, which solves the problem of hard to quantify regulator’s preference in electricity–environment coordinated regulation system. The result shows that RPF only has relationship to subsystems’ production function, and is independent of social welfare function and subsystems’ utility function. Finally, we provide an empirical research based on the western region of China from year 1995 to 2004. It reveals that regulator has relative stability preference to mitigating pollutants. And validity test confirms that the empirical result is fit well to the practice. The RPF is truly a more general and valid instrument to measure regulator’s preference in its regulated field.

Keywords: Social welfare maximization; Electricity–environment coordinated regulation; Regulator’s preference factors (RPF) (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:35:y:2010:i:12:p:5185-5191

DOI: 10.1016/j.energy.2010.07.048

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