Technological changes in the pulp and paper industry and the role of uniform versus selective environmental policy

Abstract

Abstract:\nAlthough environmental regulations may imply a cost increase on firm's conventional input factors,\nsuch regulations could stimulate the incentives to improve factor productivity. Productivity measures\nincluding indicators capturing environmental improvements may also show higher or lower progress\nthan productivity measures ignoring environmental aspects. We apply a Malmquist productivity index\napproach on micro data for the Norwegian pulp and paper industry, and find that the overall\nproductivity growth accounting for changes in emissions of COD to water is higher than the growth in\nthe productivity measure including conventional inputs only. We find the opposite result when\nincluding emissions of acids and climate gases to air. This is probably due to environmental\nregulations with opposing effects on different emissions. A decomposition of the Malmquist index into\na technical efficiency change factor and a technical change component shows that the frontier\ntechnology has changed, while the average distance to the frontier has increased.\nKeywords: Emissions, Productivity change, Paper and pulp, Malmquist index, Frontier technology

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