Environmental Economics and Policy Studies

, Volume 16, Issue 1, pp 1–19 | Cite as

Reducing CO2 emissions of Japanese thermal power companies: a directional output distance function approach

Research Article


This article examines the thermal power generation efficiency of ten Japanese electric power companies and the shadow prices of carbon dioxide (CO2) by employing a directional output distance function (DODF) with panel data for 1990–2011. We find that the shadow price of CO2 varies greatly between US$1.49 and US$288.82, depending on the company’s production strategy concerning energy supply and CO2 emissions. These shadow prices give us clues to understand how the electric power companies may respond to environmental regulations, such as environmental tax and emission trading systems. According to the DODF, an additional 53571 GWh of electricity could have been generated in 2011 at the cost of an increase of 40105 thousand tonnes of CO2, if the companies would have operated efficiently giving little consideration to CO2 emissions reduction. These increases are equivalent to 8.77 and 9.18 % of total electricity and CO2 emissions, respectively, from the ten electric power companies in 2011. On the other hand, if the companies would have operated efficiently and given first priority to CO2 emissions reduction, a further 58002 thousand tonnes of CO2, equivalent to 13.28 % of their total CO2 emissions in 2011, could have been reduced as a whole.


Directional output distance function Japan Efficiency of thermal power generation Shadow price of CO2 

JEL Classification

D20 Q40 Q54 


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Copyright information

© Springer Japan 2013

Authors and Affiliations

  1. 1.Faculty of EconomicsShiga UniversityHikoneJapan
  2. 2.Graduate School of Human and Environmental StudiesKyoto UniversityKyotoJapan

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