Environmental Efficiency Among Corn Ethanol Plants

Juan Sesmero (), Richard Perrin and Lilyan Fulginiti

No 61650, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: Economic viability of the US corn ethanol industry depends on prices, technical and economic efficiency of plants and on continuation of policy support. Public policy support is tied to the environmental efficiency of plants measured as their impact on emissions of greenhouse gases. This study evaluates the environmental efficiency of seven recently constructed ethanol plants in the North Central region of the U.S., using nonparametric data envelopment analysis (DEA). The minimum level of GHG emissions feasible with the available technology is calculated for each plant and this level is used to decompose environmental efficiency into its technical and allocative sources. Results show that, on average, plants in our sample may be able to reduce GHG emissions by a maximum of 6% or by 3,116 tons per quarter. Profit maximizing input and output allocations are also found based on observed prices. The environmentally efficient allocation, the profit maximizing allocation, and the observed allocation for each plant are combined to calculate shadow cost of reducing greenhouse gas emissions. These shadow costs gauge the extent to which there is a trade off or a complementarity between environmental targets and profits. Results reveal that, at current activity levels, plants may have room for simultaneous improvement of environmental efficiency and economic profitability.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 35
Date: 2010
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Environmental Efficiency Among Corn Ethanol Plants (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:61650

DOI: 10.22004/ag.econ.61650

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