تجزیه و تحلیل هزینه فایده زیست محیطی از استراتژی زمان جایگزین در کاهش گازهای گلخانه ای: یک رویکرد تحلیل پوششی داده ها

Assessing the benefits of climate policies is complicated due to ancillary benefits: abatement of greenhouse gases also reduces local air pollution. The timing of the abatement measures influences both the economic costs and ancillary benefits. This paper conducts efficiency analysis of ten alternative timing strategies, taking into account the ancillary benefits. We apply the approach by Kuosmanen and Kortelainen [Valuing Environmental Factors in Cost-Benefit Analysis Using Data Envelopment Analysis, Ecological Economics 62 (2007), 56–65], which does not require prior valuation of the environmental impacts. The assessment is based on synthetic data from a dynamic applied general equilibrium model calibrated to The Netherlands. Our assessment shows that if one is only interested in GHG abatement at the lowest economic cost, then equal reduction of GHGs over time is preferred. If society is willing to pay a premium for higher ancillary benefits, an early mid-intensive reduction strategy is optimal.

Climate change presents a major environmental policy challenge both at present and in the future. Through a large scale incineration of fossil fuels, human activities have released a still growing stream of CO2 and other greenhouse gases (GHGs) into the atmosphere. GHGs occur naturally in the atmosphere and are not detrimental for the environment as such. However, the emissions of GHGs contribute to the global warming through a process known as the greenhouse effect. Since GHGs are uniformly mixing in the atmosphere, climate policy requires international cooperation. In the United Nations framework convention on climate change (UNFCCC) and its famous Kyoto protocol, ratified by 180 countries [as of May 2008], participants have committed to reducing the GHG emissions by 5% from the 1990 emission levels during the period of 2008–2012.1 The Kyoto protocol and the Marrakech Accords prescribe a number of mechanisms for the GHG abatement. Some of these mechanisms allow for international trade in abatement/emissions among the participating countries. Industrialized (Annex I)2 countries are also obligated to take substantial domestic measures to cut down their GHG emissions. Given the multitude of abatement measures, it is not clear which policy measures achieve the abatement targets with the lowest costs. Moreover, the timing of the abatement measures can influence the costs. The assessment of alternative policy measures is further complicated by a multitude of ancillary benefits due to GHG abatement. The emission of CO2, the most important GHG, is directly connected to energy use. Most climate policy measures entail restructuring of energy use, with shifts in the use of different fuel types and qualities and the decrease in the total use of fossil fuels. Since the use of fossil fuels is also a major cause of air pollution, the climate policy measures can provide significant ancillary benefits in the form of reduced acidification, eutrophication, smog formation, and particle emissions. The European Environment Agency (EEA, 2006) has estimated that the climate policy that meets the EU objective of the Kyoto protocol would reduce the NOX, SO2, PM10 and PM2.5 emissions by 10, 17, 10 and 8%, respectively, by year 2030. Ancillary benefits of such magnitude should be taken into account in the economic assessment of the climate policies. Environmental cost-benefit analysis (ECBA) is the standard approach to the assessment of alternative environmental policies (e.g. Boardman et al., 2001). In many countries the legislation requires ECBA to be implemented for all public projects and policies that have significant environmental impacts.3 However, ECBA is subject to many shortcomings, as a number of economists and ecologists have pointed out (see e.g. Dorfman, 1996, Ackerman and Heinzerling, 2002 and Ackerman and Heinzerling, 2004). The economic valuation of the environmental impacts is one of the most controversial and heavily debated phases in ECBA due to the deficiencies and problems in the conventional valuation techniques (including stated and revealed preference methods).4 Valuation of the ancillary benefits presents a major challenge for ECBA assessment of the climate policy. The recent paper by Kuosmanen and Kortelainen (2007) [henceforth KK] proposed a new approach to ECBA which does not require prior valuation of the environmental impacts. Their approach is based on shadow prices in similar vein to the data envelopment analysis (DEA: Farrell, 1957 and Charnes et al., 1978).5 The unique valuation principle of DEA does not depend either on stated or revealed preferences. Rather, the valuation problem is turned the other way around by asking what kind of prices would favor this or that particular project or policy alternative. The key differences between the conventional ECBA and the DEA approach by KK are summarized by Table 1 that lists the steps involved in each approach. Both types of ECBA analyses start with problem definition, identification of environmental and social issues at stake, and the measurement of impacts (Steps 1 and 2). The pivotal idea of KK is to skip the economic valuation of impacts by stated or revealed preference methods (Step 3 of the conventional approach), and proceed directly to the discounting step. Instead of discounting cost or benefit flows, KK propose to discount the flows of physical impacts. Given the discounted impacts, KK optimize the values (or prices) of the environmental factors to maximize the competitive advantage of the evaluated project or policy (Step 4). The competitive advantage can be seen as a measure of eco-efficiency (compare with Kortelainen and Kuosmanen, 2007): a project is deemed efficient if its competitive advantage index is strictly positive, otherwise the project is inefficient. The thus obtained competitive advantage measure provides a means to assess the eco-efficiency of a project, policy, product or producer throughout the life-cycle of the unit without ex ante valuation of the various environmental impacts. Alternatives with a positive competitive advantage are possible optimal solutions to the choice problem underlying ECBA. The range of shadow prices supporting this or that project (or policy alternative) provides valuable information for the purposes of sensitivity analysis. Table 1. Steps involved in the conventional environmental cost benefit analysis (ECBA) and the data envelopment analysis (DEA) approach Step Conventional approach to ECBA DEA approach to ECBA 1 Problem definition Problem definition 2 Measurement of environmental impacts Measurement of environmental impacts 3 Economic valuation of impacts Discounting of impacts 4 Discounting of cost /benefit flows Shadow pricing the discounted impacts by DEA method, maximizing competitive advantage 5 Ranking of projects/policies according to the net present value criterion Ranking of projects/policies according to competitive advantage criterion 6 Sensitivity analysis Sensitivity analysis Table options Bosetti and Buchner (2005) have conducted efficiency analysis of eleven alternative climate policy scenarios by making use of DEA and the competitive advantage measures of KK. The scenarios differ in terms of what will happen after the Kyoto protocol ends and new climate agreements are negotiated. An innovative feature of this study is its use of synthetic data from the FEEM-RICE model (Bosetti et al., 2004), which is a multi-region applied general equilibrium (AGE) model based on the RICE model by Nordhaus and Boyer (2000). Since a large proportion of the costs and benefits of the climate policy occur far in the future, relying on the synthetic model forecasts is often the only way to meet the necessary data requirements of the ex ante ECBA. On the other hand, while AGE models are well suited for forecasting the economic and social impacts of alternative climate policies, the choice of the optimal climate policy involves tradeoffs between multiple incommensurable criteria that cannot be resolved within those models. Therefore, using the forecasts from an AGE model as inputs to the DEA assessment can be a successful recipe for a powerful policy analysis. This paper applies the KK approach to the assessment of alternative timing strategies in the greenhouse gas abatement with synthetic data obtained from the DEAN model by Dellink (2005),6 which is a dynamic, forward-looking Ramsey-type AGE model. We focus attention on the timing of the GHG abatement measures, because the timing can greatly influence the ancillary benefits as well as economic costs (Dellink and Hofkes, 2006). Ten alternative implementation strategies are considered, which include quick action, equal reduction, late action, and various dynamically changing emission paths that represent a wide spectrum of plausible timing strategies. Detailed analysis of the ancillary benefits requires detailed information about a number of environmental themes (e.g., acidification, eutrophication, smog formation, and particle emissions), which are very difficult to assess at the global scale. The DEAN model, calibrated to the historical data from the Netherlands, does include a wide variety of environmental themes. We therefore limit the assessment of the optimal timing strategy to the situation in the Netherlands, emphasizing that the model could easily be re-calibrated to data of any other small open economy. Besides adapting and reinterpreting the KK approach to the present context, we also make some useful refinements and extensions to it. Firstly, KK focus on evaluating projects that yield economic benefits but cause environmental damage. In this paper, we adapt the method to assessment of policy alternatives that yield environmental benefits at the cost of the economy. Both types of settings are common in both ECBA and eco-efficiency analysis. Secondly, KK assume that the economic prices of the environmental impacts are constant over time. However, the optimal use of a non-renewable resource according to Hotelling's rule implies that the price of the resource increases over time by a constant factor. We show that such dynamic price changes can be modelled in the DEA framework by making appropriate adjustments to the discount rates applied to the environmental impacts. For coherence of the text, the remainder of the paper is organized according to the steps involved in the DEA approach to ECBA, as stated in Table 1. Section 2 describes the problem setting. Ten alternative timing strategies for GHG abatement in the Netherlands are introduced and motivated. These ten strategies form the input to the DEAN model (Dellink, 2005). Section 3 briefly describes how the impacts of the GHG abatement strategies have been projected by the DEAN model. Section 4 discusses the discounting of the environmental impacts. Section 5 applies the DEA method to valuate the GHG abatement and its ancillary benefits and to identify the efficient policy alternatives and the price ranges that support them. Section 6 discusses and interprets the results of the DEA analysis, and conducts some sensitivity analyses based on the range of shadow prices obtained from DEA. Section 7 presents our concluding remarks.

We have assessed ten alternative timing strategies for greenhouse gas abatement by means of environmental cost benefit analysis (ECBA). The optimal timing of abatement efforts involves a tradeoff between the economic costs and ancillary environmental benefits such as reduced acidification, eutrophication, smog formation, and particle emissions. Instead of valuing the ancillary benefits by the conventional stated or revealed preference techniques, we resorted to the data envelopment analysis (DEA) approach to ECBA recently proposed by Kuosmanen and Kortelainen (2007). The present application shows the usefulness of the DEA approach in structuring the decision problem, highlighting the key criteria, and narrowing down the number of choice alternatives. The approach avoids the main weakness of the conventional ECBA: economic valuation of the environmental benefits or damages. Instead of valuing the ancillary benefits by stated or revealed preference techniques, the DEA approach turns the valuation problem the other way around and asks what kind of prices would best support this or that strategy under assessment. The shadow prices obtained with DEA represent a hypothetical valuation that can best rationalize the evaluated alternative. Policy makers can then evaluate which of the hypothetical price schemes most closely corresponds to the preferences of the society. The DEA approach works best when there exist a relatively large number of policy alternatives, and the number of environmental factors is relatively small. Of course, many real-world ECBA analyses involve a large number of environmental factors but where only few policy alternatives are available. In extreme cases, DEA may have insufficient power to discriminate between alternatives. On the other hand, DEA be complemented with additional preference information obtained with stated or revealed preference methods (see Kuosmanen and Kortelainen, 2007, for discussion). A novelty of our analysis lies in the combination of the DEA approach with the synthetic data obtained from a dynamic Ramsey-type applied general equilibrium (AGE) model. Ex ante ECBA often requires data from the future that are not directly observable or predictable from historical time series. Applied general equilibrium modeling provides a systematic framework with a sound microeconomic foundation for projecting the economic and environmental implications of the policy alternatives. This study shows that synthetic data from AGE models can be meaningfully used as input in the DEA efficiency assessment. While the model projections are never accurate predictions of what will happen in the future, they should provide reasonable ball-park estimates to assess the relative performance of the alternative timing strategies. Our ECBA assessment showed that strategies involving early reduction are generally more cost-efficient and yield higher ancillary benefits than the delayed action strategies. If one is only interested in GHG abatement at the lowest economic cost, then the equal reduction strategy is the best one. If society is willing to pay for higher ancillary benefits in the form of decreased acidification, eutrophication, smog formation, and particle emissions, the early mid-intensive reduction strategy is the best plan. The results are robust to plausible adjustments to the discount rate.