Abstract
This study introduces an Environmental Performance Index (EPI) to assess the performance of firms that produce both good and bad outputs. In the one good output one bad output case, the EPI simplifies to the ratio of good–bad output for period t + 1 and period t. After deriving the index, data for U.S. coal-fired power plants from 1985 to 1998 are used to demonstrate insights that the EPI can provide. We find that power plants with units participating in Phase I of the Acid Rain Program experience a dramatic improvement in their EPI during 1994–1995.
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Notes
This is based on Färe et al. (2004).
Jaggi and Freedman use a weighted average of bad to good outputs, see Tyteca (1997, p. 190).
The vectors upon which E t+1 t depends are included in the parentheses.
One may show that the weighted geometric mean is the only aggregation model that has this property.
While a number of plants consume fuels other than coal, oil, and natural gas, for many plants these miscellaneous fuels represent very small percentages of fuel consumption (in Btu). These miscellaneous fuels include the following: petroleum coke, blast furnace gas, coal–oil mixture, fuel oil #2, methanol, propane, wood and wood waste, refuse, bagasse, and other non-wood waste. We exclude plants whose consumption of miscellaneous fuels represented more than 0.0001% of its total fuel consumption (in Btu).
Table 1 presents summary statistics and Appendix A, which is available from the corresponding author upon request, contains a detailed discussion of the data.
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Acknowledgements
We would like to thank the Nottingham conference participants and an anonymous referee for their comments. Any errors, opinions, or conclusions are those of the authors’ and should not be attributed to the U.S. Environmental Protection Agency.
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Färe, R., Grosskopf, S. & Pasurka, C.A. Social responsibility: U.S. power plants 1985–1998. J Prod Anal 26, 259–267 (2006). https://doi.org/10.1007/s11123-006-0015-5
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DOI: https://doi.org/10.1007/s11123-006-0015-5