Efficiency, Productivity and Environmental Policy: A Case Study of Power Generation in the EU

27 Pages Posted: 10 Mar 2011

Multiple version iconThere are 3 versions of this paper

Date Written: November 4, 2010

Abstract

This study uses the EU public power generating sector as a case study to investigate the environmental efficiency and productivity enhancing performance of the European Union’s CO2 Emissions Trading Scheme (EU ETS) in its pilot phase. Using Data Envelopment Analysis methods, we measure the environmental efficiency and the productivity growth registered in public power generation across the EU over the 1996-2007 period. In the second stage of our analysis we attempt to explain changes in productivity and efficiency over time using state-of-the-art econometric techniques. Our analysis suggests two conclusions: on the one hand carbon pricing led to an increase in environmental efficiency and to a shift outwards of the technological frontier; on the other hand, the overly generous allocation of emission permits had a negative impact on both measures. These results are shown to be robust to changes in controls and specifications.

Keywords: Emissions Trading, EU ETS, Environmental Efficiency, Productivity, Growth Data Envelopment Analysis

JEL Classification: O38, Q48, Q58

Suggested Citation

Jaraite, Jurate and Di Maria, Corrado, Efficiency, Productivity and Environmental Policy: A Case Study of Power Generation in the EU (November 4, 2010). FEEM Working Paper No. 19.2011, Available at SSRN: https://ssrn.com/abstract=1772757 or http://dx.doi.org/10.2139/ssrn.1772757

Jurate Jaraite (Contact Author)

CERE ( email )

CERE
Economics Department, Umeå University
Umeå
Sweden

Corrado Di Maria

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom
441603592866 (Phone)

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