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Optimal Profits under Environmental Regulation: The Benefits from Emission Intensity Averaging

Hampf, Benjamin ; Rødseth, Kenneth Løvold (2014)
Optimal Profits under Environmental Regulation: The Benefits from Emission Intensity Averaging.
In: Darmstadt Discussion Papers in Economics, (220)
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Item Type: Article
Type of entry: Primary publication
Title: Optimal Profits under Environmental Regulation: The Benefits from Emission Intensity Averaging
Language: English
Date: 10 December 2014
Place of Publication: Darmstadt
Journal or Publication Title: Darmstadt Discussion Papers in Economics
Issue Number: 220
Series: Darmstadt Discussion Papers in Economics
Abstract:

In this paper we analyze the economic effects of implementing EPA’s newly proposed regulations for carbon dioxide (CO2) on existing U.S. coal-fired power plants using nonparametric methods on a sample of 144 electricity generating units. Moreover, we develop an approach for evaluating the economic gains from averaging emission intensities among the utilities’ generating units, compared to implementing unit-specific performance standards. Our results show that the implementation of flexible standards leads to up to 2.7 billion dollars larger profits compared to the uniform standards. Moreover, we find that by adopting best practices, current profits can be maintained even if an intensity standard of 0.88 tons of CO2 per MWh is implemented. However, our results also indicate a trade-off between environmental and profit gains, since aggregate CO2 emissions are higher with emission intensity averaging than with uniform standards.

Uncontrolled Keywords: JEL classification: D24, L50, Q54 Keywords: Environmental regulation, profit maximization, emission intensity averaging, nonparametric effciency analysis
URN: urn:nbn:de:tuda-tuprints-47056
Classification DDC: 300 Social sciences > 330 Economics
Divisions: 01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > Emprical Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
01 Department of Law and Economics
Date Deposited: 10 Dec 2014 16:08
Last Modified: 07 Dec 2023 10:48
URI: https://tuprints.ulb.tu-darmstadt.de/id/eprint/4705
PPN: 377938653
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