Data Envelopment Analysis of Climate Change Mitigation Policy for the Us Manufacturing Industry

Abstract

This study evaluates the state-level impacts of different energy and climate policy approaches on the US manufacturing industry for their environmental benefits and cost effectiveness. The study uses Data Envelopment Analysis to evaluate GHG emission reduction potential, fuel combustion efficiency, and electricity consumption efficiency and cost effectiveness across policy options. The three policy approaches considered include: (1) adopting best available technology, (2) increasing energy efficiency, and (3) increasing renewable sources for electricity generation through renewable portfolio standards (RPS). The study demonstrates that there are substantial variations in policy impacts on the US manufacturing sector at a state level, regarding both environmental benefits and cost effectiveness. In order to accommodate these state level variations and achieve optimal policy outcomes, the federal government should provide general guidance, set broad policy benchmarks and define jurisdiction issues for state agencies to choose their own policy approaches to reduce GHG emissions.