1

• Technical change and Environment in Pulp and Paper.

• Technical change and environment in most polluting manufacturing sectors

• Implementation of Best Available Technology

Technological changes in the Norwegian manufacturing

and the role of uniform versus selective environmental policy

Annegrete Bruvoll, Torstein Bye, Jan Larsson and Kjetil Telle Research Department, Statistics Norway

2

Technological changes in the Norwegian paper and pulp

and the role of uniform versus selective environmental policy

Annegrete Bruvoll, Torstein Bye, Jan Larsson and Kjetil Telle Research Department, Statistics Norway

(www.ssb.no/forskning/)

Environmental policy: incentives to develop and utilize environmentally friendly technologies

Productivity measures: - based on conventional inputs and outputs, (C) - including environmental aspects, (E)

Working forces: - general technological progress: (C) > (E) - environmental policy: (E) > (C) - the type of policy: uniform versus selective policies influence how technology

shifts

The aim of this work: - what happens when we take environmental factor into account? - explores the underlying forces

3

Previous works

General studies of the changes in front technologies: DEA and SFA analyses: Charnes et al. (1978), Aigner et al. (1977)Meeuse and van den Broeck (1977).

Malmquist index: Färe et al. (1994) decompose the Malmquist index into

- movement of the frontier - catching up to the frontier

Including environmental factors: Pittman(1983), Färe et. al. (1989), Tyteca (1997), Hailu and Veeman (2000),

Hetemäki (1996), Reinhard (2000): • technological development including environmental indicators differ from

conventional measures

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Method

Malmquist index with and without environmental factors: - reveals whether the TFP including environmental factors

is greater than the conventional TFP

Decomposition of the Malmquist index:- reveals whether the frontier moved or the plants adapted to earlier existing

technologies

EC: technical efficiency change TC: technical change

DEA analyses including environmental factors: - reveals the maximal potential for reductions in factor use and emissions

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5

The emissions in focus

Emissions per produced unit, 1992=1,00

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

1992 1993 1994 1995 1996 1997 1998 1999 2000

Greenhouse gases

Acids

COD

Policies: - relatively high carbon taxes, several measures to reduce the emissions of methane from landfills and other climate gases -regulation of sulfur content in fuels, fuel oil taxes and direct emission control -maximum emission targets per unit waste water for COD

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Data

The database: DEED - Database for Disaggregated Environmental and Economic data

covering the largest and potentially most polluting Norwegian firmsover the years 1992 to 2000

The sample: 22 most polluting plants in the pulp and paper industry, cover more than 90 % of

the total production in the sector

The variables:

Inputs: Capital, Labor, Material, Emissions (Greenhouse gases, Acids and COD)

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The conventional Malmquist productivity index1992=1.00.

0,9

1,0

1,1

1992 1993 1994 1995 1996 1997 1998 1999 2000

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

Production in the pulp and paper industry, 1980=1.00.

8

The conventional Malmquist productivity index

1992=1.00.

0,9

1,0

1,1

1992 1993 1994 1995 1996 1997 1998 1999 2000

9

Including the environment:Higher or lower technological progress?

0,8

0,9

1,0

1,1

1,2

1992 1993 1994 1995 1996 1997 1998 1999 2000

COD

Greenhouse gases

Acids

The Mamquist productivity index including emissions (TFPenv), relative to the index based on conventional factors (TFPconv), 1992=1.00.

conv

envR TFP

TFPTFP

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Possible explanations

0,8

0,9

1,0

1,1

1,2

1992 1993 1994 1995 1996 1997 1998 1999 2000

COD

Greenhouse gases

Acids

The Mamquist productivity index including emissions (TFPenv), relative to the index based on conventional factors (TFPconv), 1992=1.00.

• Low COD abatement costs

• Substitution between emissions • the abatement process produces

solid, sulfur-contaminated fuels • these fuels may substitute

electricity -> emissions of acid increase or fossil fuels -> emissions of Acids unclear,

emissions of Greenhouse gases decrease

• Non-binding regulations for Greenhouse gases and Acids?

• Economic efficiency concerns • fluctuating energy prices influence the use of fossil fuels

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Frontier movements, or movements to older technologies?

Uniform policies: Movements in the frontier, TCSelective policies: Movements behind the frontier, EC

Decomposition of the Malmquist index including emissions, technical changes (TC), and technical efficiency changes (EC), 1992=1.00

0,7

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1992 1993 1994 1995 1996 1997 1998 1999 2000

TC, COD

Conventional TC

TC, Greenhouse gases

TC, Acids

0,7

0,8

0,9

1,0

1,1

1992 1993 1994 1995 1996 1997 1998 1999 2000

EC, COD

Conventional EC

EC, Greenhouse gases

EC, Acid

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Frontier movements

• Uniform policies; Carbon taxes and maximum emissions per unit wastewater

• COD: regulations against relatively inexpensive

• Acids: -simultaneity between the regulations of COD, BOD, and acid- stable / decreasing taxes- general technological progress has implied increased acid emissions?

Decomposition of the Malmquist index including emissions, technical changes (TC), 1992=1.00

0,7

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1992 1993 1994 1995 1996 1997 1998 1999 2000

TC, COD

Conventional TC

TC, Greenhouse gases

TC, Acids

Uniform policies: Movements in the frontier, TC

Selective policies: Movements behind the frontier, EC

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Technical efficiency changes

A relative increase in the distance to the frontier

About the same level as the conventional EC

Decomposition of the Malmquist index including emissions, technical efficiency changes (EC), 1992=1.00

0,7

0,8

0,9

1,0

1,1

1992 1993 1994 1995 1996 1997 1998 1999 2000

EC, COD

Conventional EC

EC, Greenhouse gases

EC, Acid

Uniform policies: Movements in the frontier, TC

Selective policies: Movements behind the frontier, EC

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The potential emission reductions

Greenhouse gases Acids

COD

0

5000

10000

15000

20000

25000

30000

35000

40000

1992 1993 1994 1995 1996 1997 1998 1999 2000

0,70

0,80

0,90

1,00Actual mean emissons

Efficient emissions

DEA efficiency (right axis)

1

2

3

4

5

6

7

8

1992 1993 1994 1995 1996 1997 1998 1999 2000

0,7

0,8

0,9

1Actual mean emissons

Efficienct emission

DEA eff iciency (right axis)

3000

4000

5000

6000

7000

8000

9000

10000

11000

1992 1993 1994 1995 1996 1997 1998 1999 2000

0,85

0,90

0,95

1,00

Actual mean emissons

Efficienct emission

DEA eff iciency (right axis)

1992: the average firm utilized about 96-98 percent of the technology potential

2000: 85-92 percent

BAT:

- all inputs and the emissions of greenhouse gases could have been reduced by about 8-15 percent without reducing production.

- over time, significantly lower and more stable emissions

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Concluding remarks

The conventional efficiency measure might overestimate the overall efficiency gain

Implications for e.g. indicators of welfare improvements c.f. European Commission and Eurostat (1999): Towards environmental

pressure indicators for the EU.

Differing productivity paths for the productivity measures Different effect of uniform policies Simultaneity between emissions

- controversies between COD regulations and Acids Low abatement costs for some emissions

A substantial potential for further emission reductions DEA efficiency of around 90 percent in 2000

Further works Econometric analyses of the relationship between policy and the productivity

measures will reveal the causal relationships

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TC=(CB/DB*CA/DA)0.5

EC=DB/CA

A(xt, yt)

B(xt+1, yt+1)

C

DFrontier, t

Frontier, t+1