Analysis of Environmental Productivity on Fossil Fuel Power Plants in the U.S

Yung-Hsiang Lu, Ku-Hsieh Chen, Jen-Chi Cheng, Chih-Chun Chen and Sian-Yuan Li
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Yung-Hsiang Lu: Department of BioBusiness Management, National Chiayi University, Chiayi 60004, Taiwan
Ku-Hsieh Chen: Department of Applied Economics and Management, National Ilan University, Ilan 26067, Taiwan
Jen-Chi Cheng: Department of Economics, Wichita State University, Wichita, KS 67260, USA
Chih-Chun Chen: Department of Applied Economics and Management, National Ilan University, Ilan 26067, Taiwan
Sian-Yuan Li: Department of BioBusiness Management, National Chiayi University, Chiayi 60004, Taiwan

Sustainability, 2019, vol. 11, issue 24, 1-27

Abstract: In 2007, the Clean Air Act officially included greenhouse gases, making fossil fuel power plants the first of key industries regulated by the Environmental Protection Agency. How do we measure the impact of the regulations on these power plants’ productivity? Previous studies that attempt to answer this question have provided inadequate answers because their samples cover the periods only up to 2007, and they often use greenhouse gases as the only proxy for the undesirable output. This paper collects data from 133 fossil fuel power plants in the United States and covers 2004 to 2013. These power plants are divided into Sun Belt and Frost Belt based on their geographical locations. To measure the undesirable outputs, we used both carbon dioxide and toxic emissions as the proxies. The estimation model includes the construction of a generalized common stochastic frontier (metafrontier) and a Malmquist productivity index. We used the index to measure the change in productivity for the power plants before and after the implementation of the regulation. The results indicate that, since regulation in 2007, the overall production efficiency of the power plants has declined incessantly while productivity has seen a sustained downward trend despite two surges in growth.

Keywords: fossil fuel power plant; metafrontier; environmental efficiency (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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