Analysis of the association between pollution performance and input cost factors: The case of electric utility plants

Abstract

Abstract This study examines the association between the pollution performance and input cost factors in electric utility plants over a short as well as a long period of time. The input cost factors have been used as surrogates for the economic performance of a firm. The study is based on 87 fossil fuel-burning power plants owned by 15 electric power companies. Data for calculating pollution emissions were obtained from reports filed by the plants with the Department of Energy, and cost data for fuel, labor and other cost items were extracted from the Department of Energy reports for 1975 and 1987. The results show a negative association between fuel/labor costs and pollution emissions in the short-run, indicating that higher fuel and labor costs resulted in lower pollution emissions. These results can be interpreted to mean that in the short-run, firms' efforts to contain pollution required higher fuel and labor costs. The results for a period over 12 years indicate that there is no clear signal with regard to the association between pollution emissions and input costs. None of the associations between pollution emissions and input costs were significant. Furthermore, the signs of the associations were equally positive and negative. Therefore, in the long-run, input costs do not appear to have a negative association with pollution performance.