Shadow price estimation of firm's pollutants: FOA and SA approaches
by Yulin Liu; Zunbao Yu
International Journal of Environmental Technology and Management (IJETM), Vol. 18, No. 3, 2015

Abstract: Shadow price estimation of pollutants is an important problem for firm in making decisions, maximising desirable outputs, controlling product costs, and buying or selling pollutant permits in the secondary emissions trading market. In this paper we construct a pricing framework based on the directional output distance function, the fruit fly optimisation approach, and the simulated annealing algorithm to solve this pricing problem, and then test the framework using six coal mining firms with differing operating scales. Examples show that this new framework successfully determined the optimal shadow prices of the pollutants, with each firm having significantly different shadow prices for its pollutants because of their differing production frontiers.

Online publication date: Thu, 13-Aug-2015

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