Abstract
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.
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Notes
It should be noted that while nuclear power generation does not generate CO2 in the process of generating electricity, it produces radioactive waste, which causes other grave environmental and health-related issues.
Exchange rate = ¥100 per US$1.
The introduction of an environmental tax was under discussion since 2004. According to the Ministry of the Environment (2011b), the originally planned tax rate was US$6.6 per tCO2.
The term \( - qy_{2} \) represents negative revenue, because \( y_{2} \) is considered as a bad output.
We employ the quadratic form rather than the translog form, which was employed in many previous studies, because the former has been found to outperform the latter (Vardanyan and Noh 2006; Färe et al. 2010). Moreover, the quadratic form can accommodate the translation property while the translog form cannot (Färe et al. 2006).
RR 1, RR 2, RR 3, and RR 4 correspond to the time periods 1995–1999, 2000–2003, 2004, and 2005–2011, respectively. However, note that it is arguable whether our dummy variables could appropriately capture the effects of regulatory reforms on the power industry, because regulatory reforms might have ex-post effects on them.
\( x_{2} \) is the only monetary variable among the inputs. This variable is included in our analysis in order to reflect the performance of thermal plant facilities, such as machineries, equipment, buildings, and structures relevant to thermal power plants, which are not captured by other physical inputs. The fixed capital value is adjusted by the corporate goods price index deflator obtained from the Price Indexes Annual published by the Bank of Japan (2012).
Note that a kilogram of coal provides 29.0 MJ of energy; a liter of heavy oil, 41.9 MJ; a liter of crude oil, 38.2 MJ; and a kilogram of LNG, 54.6 MJ.
The parameter of dummy year 2011 in strategy 3 is negative, but its magnitude is relatively smaller than the corresponding parameters in the other strategies.
Potential increase in the outputs are calculated by “mean output × DODF × the number of company”.
The exchange rate used in Matsushita and Yamane (2012) is ¥80 to US$1. Then, we adjusted their shadow price of CO2 using our exchange rate.
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Matsushita, K., Asano, K. Reducing CO2 emissions of Japanese thermal power companies: a directional output distance function approach. Environ Econ Policy Stud 16, 1–19 (2014). https://doi.org/10.1007/s10018-013-0067-5
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DOI: https://doi.org/10.1007/s10018-013-0067-5