Considering Production Limits in Greenhouse Gas Emission Trading using the Data Envelopment Analysis Approach

Transcription

1 th Haaii International Conference on Sytem Science Conidering Production Limit in Greenhoue Ga Emiion Trading uing the Data Envelopment Analyi Approach Bo Hiao ational Taian Univerity Ming-Miin Yu ational Taian Ocean Univerity Ching-Chin Chern ational Taian Univerity Li-Chen Chou ational Chengchi Univerity Abtract Greenhoue ga emiion have been proven to be cloely related to global climate change. Thu reducing and trading greenhoue gae are important iue around the orld. In order to olve thi critical iue thi paper preent an alternative approach to implementing greenhoue ga (i.e. undeirable output) emiion trading mechanim conidering the balance beteen the environment and economic development. Specifically an aggregated concept in the form of data envelopment analyi (i.e. Centralized DEA) i ued to contruct a cap-and-trade model that conider production limitation. An application that illutrate undeirable output (i.e. greenhoue gae: CO 2 and SO 2 ) emiion and trading in 51 countrie i alo demontrated. The application effectively illutrate the contant buying and elling of information under total amount quota hile maximizing deirable output level. The reult alo preent direction for poible improvement in country efficiency. 1. Introduction In recent year countrie have encountered the mutually influential and cloely related problem of environmental pollution global arming and financial crie thu driving orld leader to deciively addre thee problem. At the Climate Change Summit (COP15) in Copenhagen Denmar in December 2009 delegate from 192 countrie gathered and ored on a ne frameor agreement on the reduction of global greenhoue ga emiion. The ummit a intended to etablih clearly defined goal for emiion reduction from 2012 to 2020 and implement long-term goal for Emiion reduction and economic development ere emphaized and variou countrie hoped to enter into an agreement that ould enable the effective formulation of action and policy direction. Againt thi bacdrop enuring or maintaining economic development hile taing into account global reduction target neceitate an undertanding of ho relative energy policie improve general economic productivity through production tructure. When breaing don energy intenity and the carbonization index traditional reearcher generally adopt the carbon intenity index via the decompoition approach [ ]. Thi approach enable the meaurement of the energy input intenity neceary for each unit of economic output during production. The meaured value repreent the unit production of energy. Moreover the energy input per unit from carbon dioxide (CO 2 ) emiion repreent the energy cleanline index [ ]. Hoever the abovementioned approach i rather uective and may reult in a mi-etimation of meaurement [420]. To addre uch hortcoming reearcher began tudying the efficiency meaure index hich i baed on the economic theory of production [19 21]. Hoever thee tudie conider only one type of greenhoue ga intead of variou gae and fail to tae into account the changing extent of greenhoue ga emiion reduction. Although CO 2 equivalent could convert greenhoue ga into the ame metric it ignore the degree of influence of a pecific greenhoue ga to economic development under an aggregative perpective (e.g. CO 2 and Sulfur dioxide (SO 2 ) emiion reduction hould involve different percentage of each but not overall CO 2 equivalent emiion aggregative level hould be 5.2% of thoe in 1990). In addition previou tudie [9] have directly employed pat experience gro national product (GP) carbon credit auction and population to determine initial alloance emiion permit (e.g. grandfathering here alloed emiion rate ere baed on hitorical emiion production data). Hoever uch bae are not uitable for evaluating countrie manned by the Protocol Adminitration (e.g. COP). Thee criteria alay uffer from fair challenge. Developed countrie alay tae pat experience GP and auction a their initial bae rather than population or effective optimal production (e.g. regardle of actual ate). Moreover hen the aim i to achieve optimal alloance level information on bet practice cannot fully fit the alloance permit requirement of a pecific country utilizing the relative and centralized /12 $ IEEE DOI /HICSS

2 perpective to illutrate dipatched greenhoue ga quota. Furthermore thee tudie [11 12] merely ue an individual country perpective rather than a centralized perpective hen managing the total amount of greenhoue ga ithin a given period. Handling technique could identify the reource utilization ratio of each country effectively but thee can neither identify nor accomplih output performance. In addition the overall undeirable output (i.e. greenhoue gae) hould atify the total amount of regulation (i.e. an agreed target or alloance target) uch that the total value of greenhoue ga hould remain at the control level hen emiion trading (ET) i employed. Moreover deciion maer hould not fully ell their greenhoue ga emiion permit quota to another country. They hould intead conider their input and output capacitie for elling under their control limit. In comparion buyer alo need to conider uch limit. In vie of above iue thi preent tudy propoe another approach. It employ centralized data envelopment analyi (CDEA) a developed by Lozano et al. [16 17] for emiion trading (ET) of total global emiion. Thi method allo for tranfer and conider that each country may ell or buy each other greenhoue gae quota under the balance beteen the environment and economic development. Moreover it calculate production through production control regulation (via trong and ea dipoability of undeirable output). The ret of thi paper i organized a follo: Section 2 recalled baic concept on centralized DEA and ea diability hile Section 3 preent and explain our methodology. Section 4 report the empirical reult from 51 countrie ith SO 2 and CO 2 emiion conideration. Latly Section 5 ummarize the finding and offer concluion and uggetion for future reearch. 2. Fundamental Concept For illutrating ho to treat greenhoue ga variable in thi ection e introduce the development of undeirable output (undeirable output in thi tudy mean greenhoue gae) and centralized DEA The Strong and Wea Diability of Undeirable Output A previou tudie [14] noted data envelopment analyi (DEA) i able to extract individual information by comparing each country performance to peer ith a bet practice. Färe et al. [3] ere the firt to apply claic output-oriented DEA analyi to a et of US electric plant. A production i aid to have trong dipoability of undeirable output if the undeirable output are freely dipoable. The cae of ea dipoability i verified hen a reduction in ate and/or emiion force a loer production of deirable output. If the DEA efficiency core that reult from the trong and ea dipoability aumption are equal then production that i unaffected by the undeirable production can be reduced ithout any reduction of the deirable output. That i undeirable output can be abated ithout reducing deirable output. If the efficiency core are different then the ea dipoability i binding; any reduction in the undeirable production carrie an output lo. Thi deirable output lo can be meaured by comparing the efficiency core obtained under the trong and ea dipoability aumption. For the to dipoability reference et the trong dipoal reference technology for all output and input i the output et by the area OFBCDE. The undeirable output ea dipoability i repreented by the area OABCDE in Figure (1). For pecific deciion-maing unit (DMU) G it efficiency core of trong dipoability calculation ill proect into K but the efficiency core of ea dipoability ill proect into K. Thi implie that for G the K ill be higher than K. Figure 1: The trong and ea dipoability of undeirable output by hyperbolic meaured 2.2 Centralized DEA In exiting DEA literature reource (i.e. greenhoue ga) reallocation i dealt ith only for the purpoe of guiding an inefficient DMU hifting along the direction of a proected ray from it current poition onto the frontier [10]. Folloing the dicuion in Section 1 conider an aggregated total amount of regulation on production unit coniting of everal individual production unit; even if all the underlying individual unit are efficient the aggregated unit i not [12]. A uch ome tudie have enhanced thi iue by combining DEA ith other technique [18]. Lozano et al. [17] and Lozano and Villa [16] ere the firt to introduce the concept of centralized data envelopment analyi (CDEA) model to optimize the combined reource conumption of all unit in an organization rather than conidering the conumption 1158

3 of each unit eparately. CDEA i particularly relevant in ituation here certain variable are controlled by a central authority rather than individual unit manager. Upon centralization iue on overall ytem efficiency are reolved rather than imply iue pertaining to individual level. Lozano et al. [17] recommend a ytem on ho regional authority hould allocate a number of gla container among the different municipalitie ithin the region o a to maximize the total amount of gla collected. Lozano and Villa [16] extend their tudie to a centralized DEA approach that allo donizing through the poibility of cloing deciion-maing unit. 3. Modeling and Problem Formulation 3.1 Aumption and otation Before decribing the propoed frameor ome aumption and term need to be clarified. Firt e aume that all countie have the ability to buy or ell greenhoue ga emiion permit and that they have ufficient maret information. Second there i no ubtituting the relationhip beteen greenhoue ga emiion right becaue of contituent tructural contraint and their impact to the environment. For example SO 2 cannot replace CO 2 and vice vera. Third greenhoue ga emiion permit elling cot and peruading cot cannot be expoed in our tudy. Fourth only deirable output a ell a undeirable output can ue the aggregated vie for analyi (in thi paper aggregated vie ue the centralized perpective to ummarize a pecific reource from overall countrie and aggregate it into a centralized vie). Fifth folloing the fourth aumption only undeirable output (i.e. greenhoue gae) hould be controlled ithin a range. In term of range a pecific country cannot ell/buy out of limit (i.e. the greenhoue gae hould cover the to value). Sixth the undeirable output cannot tand alone ithout the deirable output becaue of oint production. Seventh the commitment of total undeirable output regulation have regulated the amount of the current level of undeirable output. Eighth our propoed ET a deigned for one-period. That i e only conider a one-hot dataet for analyi. Table 1 ho the notation for the abovementioned four phae. Table 1: Decription of notation otation Definition/Item umber of countrie. ni umber of input variable. no umber of deirable output variable. nb umber of undeirable output variable. The trong dipoability of undeirable output. The ea dipoability of undeirable output. ( 1... ) Indexe for countrie. r ( r 1... ) Indexe for countrie. i ( i 1... n ) Indexe for input variable. i o ( o 1... n ) o Indexe for deirable output variable. b ( b 1... n ) Indexe for undeirable output variable. b p( p ) The dipoability type of undeirable output manipulation. The x i thpecific input variable of the th i country The o thpecific deirable output variable of y o the th country The b thpecific undeirable output variable y of the th country In-efficiency core of the th country by ( p) p type dipoability of undeirable output evaluation. Slac for i th pecific input variable of the ( p) th country by p type dipoability of i undeirable output analyi pa through ( p) have reduced in the adutable input. Slac for o th pecific deirable output variable of the th country by ( p) p type o dipoability analyi pa through ( p) have expended in the adutable output. The b th pecific undeirable output variable of the ( p) th country under the undeirable output frontier of p type dipoability analyi equal to a lac vector. The lo bound of ( L) o th pecific deirable y o output variable of the th country The upper bound of ( H ) o thpecific deirable y o output variable of the th country The optimal efficiency core after phae III applied. The b th pecific undeirable output variable added in the emiion trading analyi of the th country. The b th pecific undeirable output variable reduced in the emiion trading analyi of the th country. Optimal value of b th undeirable output y variable of the th country after emiion trading complete. (buying or elling) Vector for proecting ( 1... ) th country in phae I and Phae II Vector for proecting r th country in Phae ( 1r... r) III and Phae IV 3.2 Environmental Modeling Setting (Phae I) Folloing the Table 1 notation the input quantitie ni are repreented a xi ( x1 x2... xn ) R i the no deirable output yo ( y1 y2... yn ) R o and the nb undeirable output by yb ( y1 y2... yn ) R b. The production technology i characterized by the 1159

4 production et T ( yo yb xi) xi can produce ( yo y b) or alternatively by the output et Px ( i) {( yo yb) ( yo yb xi) T}. Folloing Section 2.1 ea dipoability i defined a: output are ealy dipoable if ( yb yo) P( xi) and 0 1 implie ( yo yb) P( xi). Thu ithout explicitly introducing environment tand it i poible to define an initial efficiency meaure uect to a trong dipoal reference technology a Model (1). (1) T ( xi ) ( yo yb ): i yo yo; y yb ; xi xi ; R The graphic hyperbolic meaure for the introduced propoition i illutrated in thi tudy. Firt introduced and updated by Färe Groopf and Lovell [6] ho introduced the graph hyperbolic meaure. One can refer to Färe et al. [6] for more detail. In addition the inequality contraint in Model (1) on input and output reflect that output and input are freely dipoable. The programming model ( E ) of trong dipoal reference technology can be repreented a Model (2). max (2) E y o [ x i yb ] T Model (2) i aumed to be cloed and bounded atifying the condition of the trong dipoability of output and input. Similarly the undeirable output ea dipoability reference technology i defined a Model (3). T ( xi ) ( yo yb ): i yo yo ; y yb; xi xi ; R (3) The inequality contraint in Model (3) on input and deirable output reflect that deirable output and input are freely dipoable. In contrat the equality of contraint in Model (3) on undeirable output i repreented by ea dipoability. The efficiency meaure (the programming model ( E ) of ea dipoal reference technology) i computed by olving via Model (4). m ax (4) E y o [ x i yb ] T Once the trong and ea efficiency core have been calculated it i poible to generate the minimum undeirable output y L hile till alloing o production of deirable output on the location of the upper limit for a production proce y H. 3.3 Regulatory Standard Building (Phae II) According to Zofio and Prieto tudy [23] any increae of deirable production along ith pollutant reduction mean efficiency gain in environmental term. Hoever reducing undeirable production may not be poible ithout auming certain cot. If undeirable output reduction are forced by production tandard they may bind production procee. That i a given tandard on undeirable production may force the country to reduce it deirable production to meet thi limit. Thu countrie may be retricted in their production ability and thereby uffer from efficiency loe in the form of reduced production of the deirable output. In other ord the undeirable output hould be bundled on a range ith loer and upper bound. ( L) Regarding the loer limit y e ant to no the minimum amount of undeirable output neceary to carry out production. A uch identifying y ( L) require that e olve the folloing problem aociating undeirable output lac to the quantitie from Model (2) and (4). For a pecific th country the loer bound of b th undeirable output quantity i concerned ith the reduction of input lac ( ) and expanion of the deirable output lac ( o i ) that conider the caling of the pecific output variable hile ignoring the undeirable output lac. A dicued three lac are ued for calculating the oective function for finding the loer limit of undeirable output a hon in Eq. (5.1). nb no ni min b o i (5.1) b1 o1 i1 (Deirable Output Contraint) * yo o yo o1... no (5.2) 1 Furthermore the calar value of * can be obtained in Model (2) by decribing the ay in hich the mot deirable output could be expanded and the undeirable output hired. (Undeirable Output Contraint) y b 0 b1... nb (5.3)

5 In thi phae the model ignore the undeirable output lac and doe not require any improvement on them. A uch equality i ued to explain thi relationhip and the relationhip of y b i 1 upported. It implie that undeirable output lac are equal to the loer bound of undeirable output value ( L) ( y ). In term of undeirable output value there are no exiting undeirable output lac and thee variable can be een a fixed-output variable. (Input Contraint) xi i xi i 1... ni (5.4) 1 The equality form of Eq. (5.4) repreent the input of efficiency frontier hich hould be equal to the current tate of th country minu it input lac. In other ord if 1 Eq. (5.4) doe not contain any lac. That i i 0. (Additional Contraint) R (5.5) Model (5) ho that y ( L) b a decided by not only the undeirable output value but alo the input lac and output lac for the th country. Thi implie that the undeirable output loer bound ha bundled the production conideration ith input and deirable output. Therefore the loer bound of b th undeirable output of thcountry could be * determined by Eq. (6). The lac value of b of Eq. (6) can be obtained in Model (5). ( L) * yb b (6) ( H ) In the upper bound cae y the minimum production of the undeirable output i ithout utaining output congetion. Similarly to olve for the ( H ) upper limit y it i important to mention that no ate happen if. When thi relationhip i atified it i clear that the undeirable output level i not relevant in olving the linear program. Thu e can calculate the non-binding regulation by olving Model (7). nb no ni min b o i (7.1) b1 o1 i1 yb * yo o yo o1... no (7.2) 1 y b 0 b1... nb (7.3) 1 xi i xi i 1... ni (7.4) 1 R (7.5) * The calar value of can be obtained in Model (4) by decribing the ay in hich the mot deirable output could be expanded and undeirable output maintained at the original level. Furthermore the explanation for Eq. (7.1) (7.5) refer to Eq. (5.1) (5.5). The upper bound of b thundeirable output of th country could be determined by Eq. (8). ( H) ( )* yb b (8) After Eq (6) and (8) a pecific regulation for the b th variable of a th country ould range beteen the limit a Eq. (9): ( L)* ( H)* y y y (9) Becaue of the calar of efficiency core of ea and tring dipoability of undeirable output the efficiency core of ea dipoability are alay larger than or equal to the efficiency core of trong dipoability. A uch Eq. (8) i eay to identify. After etting the regulatory tandard (i.e. y ( L) and y ( H ) ) for a given country hile applying Model (5) and (7) and Eq. (6) and (8) thi pecific country may bear in mind thee technical limit before ET. 3.4 Aggregative Reource (Phae III) A dicued Phae III involve finding the aggregated deirable output calar value maximized (deirable output) at the given level of aggregated undeirable output that cannot be changed and input that can be reduced a hon in Eq. (10.1). Deirable output and undeirable output variable may be ued for evaluation under an aggregated vie becaue thee can be planned under the centralized perpective a hon in Eq. (10.2) and (10.4). Furthermore after applying the centralized vie value for the undeirable output hould be equal to the current level. A uch equality i ued rather than a calar to expand their value for repreenting their relationhip. For Eq. (10.4) the deirable aggregated output ill be caled to ( in thi paper i alay larger than or equal to 1). Max (10.1) (Undeirable Output Contraint) b b 1161

6 y y rr (10.2) r br r1 1 r1 The inequality form of Eq. (10.3) repreent the retriction of input in thi phae. Thee input are contrained in an individual perpective rather than an aggregative perpective becaue of the reearch target (i.e. treat ET on undeirable output and increae the deirable output for each country). (Input Contraint) rxi xir i 1 ni (10.3) r1 Furthermore the output calar value of can be obtained in Model (10) by decribing the ay in hich the mot aggregated deirable and undeirable output could be expanded and hrun repectively a hon in Eq. (10.4): (Deirable Output Contraint) y Y o1 n (10.4) r o or o r1 1 r1 Beide enuring the overall deirable output are larger than the current level there i alo another Eq. (10.5) that impoe no deirable output orening for each country. Although total output deirable production i guaranteed not to decreae (Eq. 10.4) the output production of ome countrie may be le than current level (i.e. mot increaing output production quota are centralized to ome country and thu ome country output production may be le than the current level). Moreover folloing the CDEA concept e alo need to tae into account that countrie operate autonomouly; therefore the Eq. (10.5) hould be a bundle. A uch inequality i ued to explain thi cae of relationhip (i.e. output characteritic). ryo yo o1 no (10.5) r1 Any intenity variable cannot be le than zero a hon in Eq. (10.6): r 0. r 1.. (10.6) 3.5 Executing Emiion Trading (Phae IV) Policy exchange allo the authoritie to tranfer undeirable output among countrie at the original overall level ith the level of deirable output increaed in each of their countrie. The authoritie can only tranfer undeirable output among countrie (i.e. they are merely aduted in term of their undeirable output from i th country to th country;i ). The oective for Phae IV i the tranfer of undeirable output hile increaing the deirable output. That i to determine the um of lac of undeirable output that can be tranferred a hon in Eq. (11.1). n b ( ) b1 Max (11.1) For the th country e mut mention that Eq. (11.1) demontrate that the th country need to buy ( ) and ell ( ) of their greenhoue quota to another country. Equation (11.1) illutrate that the pecific country mut maximize it purchae and ale. (Deirable Output Contraint) * ryo yor o no r1 1 r1 ; 1 (11.2) * Here i obtained from the optimal value of Model (10). Setting the optimal output calar * for Model (11) can be een a uing the reallocation perpective to reach the ideal output under the centralized DEA perpective. ryo yor o1 no. (11.3) 1 A retriction i added (ee Eq. (11.3)) to guarantee that the above condition i atified enuring that the output level are not zero or le than zero. In other ord the lac value ill alay be le than the oberved deirable output value. For conitency the contraint that impoe no output orening (Eq. 11.3) hould appear in Model (11) compared ith Model * (10). Otherie may not lead to optimal olution in Model (11). (Undeirable Output Contraint) r y ( ybr br br ) r1 1 r1 (11.4) Thi phae of analyi only focue on the lac value of undeirable output that can be added or excluded a hon in (Eq.11.4). r y ybr br br ; r 1... (11.5) 1 In Eq. (11.6) a contraint i added for avoiding all the lac of undeirable output that ill be equal to zero. br br r1 r1 ; r 1... (11.6) Hoever the value of the um of the added lac and excluded lac hould be zero (i.e. the added lac are equal to the excluded lac) a hon in Eq. (11.6). Therefore thi phae concentrate on the undeirable output. 1162

7 ( L y ) br br br ybr ; r 1... (11.7) ( H y y ) ; r 1... (11.8) br br br br The value of and repreent the increaing and decreaing amount of undeirable output repectively. Eq. (11.7) and Eq. (11.8) ho the amount of undeirable output limited on a range calculated by Model (5) and (7). Eq. (11.8) illutrate ho the exchanged undeirable output hould be maller than y ( H ) br. For an efficient country evaluated * by and L * y ill be equal to y H. (Input Contraint) r xi xir; i 1... ni r 1... (11.9) 1 Equation (11.9) in Model (11) hich repreent the reference point i a linear combination of unit. Thu the reference et may include unit that operate in a different amount of input than the aeed unit. (Additional Contraint) r 0. 0 r 1 (11.10) br br Model (11) alo provide information on total reduction in undeirable output; the optimal r i alo obtained. Uing the intenity variable of Phae IV the undeirable output value in each country i eay to compute. For a pecific country the value of the undeirable output ill be retricted to the difference beteen the original value and evaluated value via Eq. (12). * y y y (12) In other ord the value of y ign i repreented by the amount of undeirable output quota that hould be bought ( y i negative) or old ( y i poitive). 4. Empirical Reult 4.1 Data and Input-output Variable Data are obtained from the International Labor Organization (ILO) Carbon Dioxide Information Analyi Center (CDLIAC) (2000) Penn World Table and the U.S. Energy Information Adminitration. Some countrie ith incomplete data ere eliminated; therefore the obervation conited of data from 51 countrie. The variable pecification refer to the or of Jeon and Sicle [11] and Kumar [12]. In addition for conidering many type of greenhoue ga proceing abilitie imultaneouly e added another undeirable output: SO 2 hich i related to the acid rain program (RECLAIM). Acid rain i mainly caued by emiion of SO 2 that react ith ater molecule in the atmophere to produce acid. Global government have attempted ince the 1970 to reduce the releae of SO 2 into the atmophere ith poitive reult. Therefore both CO 2 and SO 2 ill be treated a undeirable output in our tudy. A uch ix variable are choen coniting of three input and three output. The three input variable include capital ( x i1 in US dollar) labor force ( x i2 in number of peron) and energy ue ( x i3 in ton). The three output conit of GDP ( y o1 in US dollar) SO 2 ( y b1 in ton) and CO 2 ( y b2 in ton) all of hich are adutable. Here y b 1 and y b2 are undeirable output. The analyi of the decriptive tatitic of the data i preented in Table 2. A follo up on the frameor in Section 3 ho that ni 3 and no 1 after hich SO 2 ( y b1 ) and CO 2 ( y b2 ) (i.e. nb 2 ) can be analyzed in the propoed model. 4.2 Strong and Wea Diability Efficiency Analyi Folloing Model (2) and (4) the trong and ea dipoability efficiency meaure are olved. Once thee to efficiencie are calculated inefficiency i tranlated into deirable output production lo that i determined by. The 14 countrie (i.e. countrie and 50) ho imilar efficiencie of trong and ea dipoability ( 1 ); thee countrie demontrate that no lo occur (i.e. thee countrie do not have any lac). 4.3 Production Limit Baed on Model (5) and (7)and Eq. (6) and (8) it i poible to calculate the loer and upper limit ( L) ( H ) ( L) ( H ) y br 1 y br 1 y b2r y b2r. Table 3 ho the production limit of CO 2 and SO 2 for each country. The econd and third column (eventh and eighth column) of Table 3 repreent the SO 2 upper and loer bound of countrie 1 26 (countrie 27 51) after efficiency core of trong and ea dipoability have been applied. The fourth and fifth column (ninth and tenth column) of Table 4 repreent the CO 2 upper and loer bound of countrie 1 26 (27 51) after efficiency core of trong and ea dipoability have been applied. In Table 4 thee countrie (countrie and 50) demontrate that their CO 2 and SO 2 regulation upper and loer bound 1163

8 are the ame implying that thee countrie have no exiting lac on input and output. 4.4 ET Folloing Model (10) (11) the undeirable output can be right ized for maximum deirable output performance. A een in Table 4 only 12 countrie do not need to trade undeirable output (countrie and 50) indicating that thee countrie have reached the frontier from a centralized perpective. The value ( =1.173) mean that GDP can be increaed to (USD). After conducting Phae IV analyi e found that 12 countrie do not buy or ell their quota to other. Thi reult contradict the reult of the Phae I analyi. Of thee 12 countrie and 42 ere found to be efficient ith Phae I analyi but ere inefficient ith Phae IV analyi. In contrat countrie 2 40 and 50 ere not found to be efficient ith Phae I analyi but ere efficient ith Phae IV analyi. Phae II defined the production limit and ignored the undeirable output lac (or et them to zero). Phae IV conidered the amount of overall undeirable output quota that hould be dipatched to each country. 4.5 Dicuion Baed on our empirical reult the difference beteen the ra data and Phae IV reult for SO 2 and CO 2 analye ere obtained the efficiency core for * the 51 countrie uing the formula ( y y y ). Table 2: Decriptive Statitic Data of Input and Output from 51 Countrie Meaure Total Mean Standard deviation Max value Min value x E E E E i1 x E i2 x i3 y E E E E o1 y b1 y b2 Table 3: Production Limit of CO2 and SO2 DMU SO2 CO2 DMU SO2 CO2 Lo Upper Lo Upper Lo Upper Lo Upper

9 Table 4: Emiion Trading DMU SO2 CO2 SO2 CO2 DMU SO2 CO2 SO2 CO In Figure 2 the SO2 (i.e. potitive i repreented to ell negative i prenented to buy) hich i ued to tranfer CO 2 quota from elling to buying i repreented on the horizontal axi hile the CO2 hich i ued to tranfer SO 2 quota from elling to buying i repreented on the vertical axi. Both the horizontal and vertical axe have three value: one i et higher than zero and the other i et loer than zero. The to axe eparate the pace into 9 zone. Each zone can increae their GDP except Zone 5. Hoever they hould tae account of the different policy for increaing their GDP under the total amount of regulated undeirable output. For example country 6 (Zimbabe) can only ell SO 2 quota and maintain the CO 2 current level for increaing their GDP. From the perpective of SO 2 quota Zone 5 ill ue ton of global CO 2 quota (i.e ton) (48%). In other ord only 52% of SO 2 quota can be allocated for buying and elling. In term of tranferring percentage of CO 2 only 41.6 % can be for buying and elling. Baed on Figure 2 purchaing countrie no hich country they can buy from. Similarly the elling countrie no hich countrie they can ell to. In limiting the greenhoue ga quota each greenhoue ga quota can match the eller and buyer. Buy CO2 Unch anged CO2 Sell CO2 Buy SO2 Unchanged SO2 Sell SO2 Zone 1 Zone 2 Zone (3/51) (4/51) 44 (7/51) Zone 4 4 (1/51) Zone 7 /A Zone (12/51) Zone (9/51) Zone 6 23 (1/51) Zone (14/51) Figure 2: Selling and Buying Emiion Permit 5. Concluion Within the ET approach utilized in thi paper the propoed trategy of elling and buying quota i a valid tool for the invetigation of tranferring among countrie. The modification of centralized DEA i decribed to reallocate the greenhoue gae of 51 countrie ith conideration of economic development trategie. The four-phae calculation are alo ued for the Conference of Partie application context that illutrate a number of uggetion for each country. 1165

10 Thi tudy provide evidence that a trading approach could be an alternative to be applied in global greenhoue ga emiion iue. While conidering production limit in greenhoue ga emiion trading our approach could olve ome difficult political iue including firt freeing countrie from quota i ain to providing a ubidy; uch treatment i vieed a being in favor of countrie and goe againt plant decommiioning and updating a ell a indutrial tructural adutment. Second exceive free quota ill reduce incentive for indutrie to invet in alternative energy ource and greenhoue ga reduction technologie. Third emiion right quota may elicit profit-driven behavior by interet group. Hoever the preent tudy ha certain limitation. From an approache perpective firt the ame eight are ued to evaluate each undeirable output. More preciely the importance or non-importance of output i not conidered. We ugget that the eight of CO 2 and SO 2 can be evaluated by analytic-netorproce (AP). Second the external environmental factor are excluded in thi tudy hich may affect the reult of the ET of greenhoue ga. Third the cot for elling and buying of greenhoue ga i ignored in thi tudy. Future tudie hould revie the methodology and content to include the abovementioned limitation o that a hybrid approach can be applied to a more realitic etting. Reference [1] A.D. Athanaopoulo Goal programming & data envelopment analyi (GoDEA) for target-baed multi-level planning: allocating central grant to the Gree local authoritie European Journal of Operational Reearch pp [2] A.D. Athanaopoulo Deciion upport for target-baed reource allocation of public ervice in multiunit and multilevel ytem Management Science 44(2) 1998 pp [3] R. Färe S. Groof C.A.K. Lovell and C. Paura Multilateral productivity comparion hen ome input are undeirable: a nonparametric approach The Revie of Economic and Statitic 71(1)1989pp [4] T. Dietz and E.A. Roa Rethining the Environmental Impact of Population Affluence and Technology Human Ecology Revie 11994pp [5] L.A. Greening Effect of human behavior on aggregate carbon intenity of peronal tranportation: comparion of 10 OECD countrie for the period Energy Economic 26 (1)2004 pp [6] L.A. Greening W.B. Davi and L. Schipper Decompoition of aggregate carbon intenity for the manufacturing ector: comparion of declining trend from 10 OECD countrie for the period Energy Economic 20 (1) 1998 pp [7] L.A. Greening M.Ting and W.B.Davi Decompoition of aggregate carbon intenity for freight: trend from 10 OECD countrie for the period Energy Economic 21 (4)1999pp [8] L.A. Greening M. Ting and T.J. Kracler Effect of change in reidential end-ue and behavior on aggregate carbon intenity: comparion of 10 OECD countrie for the period 1970 through 1993 Energy Economic 23 (2) 2001pp [9] L.H. Goulder I.A.W. Parry R.C. William III. and D. Burtra The cot-effectivene of alternative intrument for environmental protection in a econd-bet etting Journal of Public Economic pp [10] V.M. Giménez-García J.L. Martínez-Parra and F.P. Buffa Improving reource utilization in multi-unit netored organization: The cae of a Spanih retaurant chain Tourim Management pp [11] B. M. Jeon and R. C. Sicle The Role of Environmental Factor in Groth Accounting Journal of Applied Econometric pp [12] S. Kumar Environmentally Senitive Productivity Groth: A Global Analyi Uing Malmquit-Luenberger Index Ecological Economic pp [13] Kaya Y. "Impact of Carbon Dioxide Emiion Control on GP Groth: Interpretation of Propoed Scenario" Paper preented to the IPCC Energy and Indutry Subgroup Repone Strategie Woring Group Pari1990. [14] H.F Lei and T.R. Sexton Data Envelopment Analyi ith reve input and output Journal of Productivity Analyi pp [15] X.Q. Liu B.W. Ang and H.L. Ong The application of Diviia index to the decompoition of change in indutrial energy conumption The Energy Journal 13(4) 1992pp [16] S. Lozano and G. Villa Centralied DEA model ith the poibility of donizing Journal of the Operational Reearch Society pp [17] S. Lozano G. Villaa and B. Adeno-Díaz Centralized target etting for regional recycling operation uing DEA Omega pp [18] O. Mielni and J. Goldemberg The Evolution of the "Carbonization Index in Developing Countrie Energy Policy pp [19] D. Tyteca On the Meaurement of the Environmental Performance of Firm: a Literature Revie and a Productive Efficiency Perpective Journal of Environmental Management pp [20] R. Yor E. A. Roa and T Dietz. The Ecological Footprint Intenity of ational Economic Journal of Indutrial Ecology 82005pp [21] J. M Yuno and D. Hadon The Efficiency of the ational Electricity Board in Malayia: An Intercountry Comparion Uing DEA Energy Economic pp [22] Z. Zhang Decoupling China' Carbon Emiion from Economic Groth: an Economic Analyi and Policy Implication. World Development pp [23] J. Zofio and A. M. Prieto Environmental efficiency and regulatory tandard: the cae of CO2 emiion from OECD indutrie Reource and Energy Economic pp