The impact of environmental constraints on productivity improvement and energy efficiency in integrated paper and steel plants Page: 1 of 12
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THE IMPACT OF ENVIRONMENTAL CONSTRAINTS ON
PRODUCTIVITY IMPROVEMENT AND ENERGY EFFICIENCY IN
INTEGRATED PAPER AND STEEL PLANTS
Gale A. Boyd and F IE
Argonne National Laboratory, Decision and Information Sciences Division"
John McClelland, SEP 0 3 196
University of Maryland, Department of Economics
Analysis that assess the level of energy efficiency (or inefficiency) raises the
economic question, Is efficiency of energy use different from other inputs? In this study,
energy efficiency is examined from the perspective of total factor efficiency, i.e. energy is
treated the same as all other inputs, which are all examined for evidence of technical
inefficiency. In addition, the linkage between input usage, productivity, and levels of
pollution output are examined. This paper present the methodology and empirical results
for two energy and pollution intensive sectors, the integrated steel and paper industries.
The methodology for measuring efficiency is based on the output distance function
and the Hyperbolic graph efficiency measure, both of which are mathematical
representations of the 'best practice' production technology. Data on levels of pollution
emissions are used to measure plant level efficiency in environmental performance, i.e.
reducing pollution levels. Observed data on emissions, rather than permits, violations etc.,
are used to assess environmental performance, as opposed to compliance. Empirically
observed differences between average performance and the 'best practice' are given as
evidence of so-called 'win-win' environmental, energy, and productivity improvements, as
suggested by Porter and others.
To assess the claims that mandated pollution abatement investment 'squeezes out'
other productivity and energy efficiency investments, data on pollution abatement
investment costs are used to measure plant level productivity under various constraints on
abatement investment. The productivity and energy efficiency implications of pollution
abatement investment constraints are explored using interplant productivity and energy
intensity comparisons using an input distance function, also a mathematical representation
of the production technology. Abatement investment is treated as a constraint within total
plant investment to explore the implication of possible capital rationing on productivity
and energy efficiency.
The analytic approach uses plant level data economic data from the Census Bureau
and pollution data from the EPA. Linear programming is used to compute the input,
output, and Hyperbolic distance functions for each plant in the data set and compares that
I Work sponsored by the United States Department of Energy, Office of
Domestic and International Energy Policy and the Office of Industrial
Technology under contract number W-31-109-Eng-38
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Boyd, G. A. & McClelland, J. The impact of environmental constraints on productivity improvement and energy efficiency in integrated paper and steel plants, article, 1996-08~; Illinois. (digital.library.unt.edu/ark:/67531/metadc676357/m1/1/: accessed December 13, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.