Emissions abating technology adoption in a coal trading network

Abstract

This paper demonstrates that an investment decision such as the acquisition of a new technology that affects a particular asset is associated with the dynamic trading network of this asset. Therefore, the exogenous variables of this trading network can be used to identify the determinant factors of the investment decision and their final effect on the dynamic trading network. Using a coal trading network among the different US states between 1990 and 2005, this research studies the factors that affect the corporate strategies to adopt emission abating technology. Typically, these companies improve their processes and equipment to lower emissions, pay the news costs of emissions, or use less contaminating low-sulfur coal (high-quality inputs). Efficiency increases when more sub-bituminous coal is used because of its lower level of emissions in comparison with bituminous coal and when the electric power sector is deregulated. This research indicates that firms select strategies that simultaneously control emissions and minimizes costs. The firms reduce their pollution using higher-quality inputs (sub-bituminous coal), investing in new emission abating technology or a combination of both approaches.