Pollution from the electric power sector in Japan and efficient pollution reduction

Under the scheme of the Kyoto Protocol, there are plans for the efficient reduction of carbon dioxide emissions. In the electric power sector, nuclear power generation, which emits no carbon dioxide in the process of generating electricity, has come under scrutiny. However, this energy produces a new environmental issue: the disposal of radioactive waste. First, we derive shadow prices of carbon dioxide and low-level waste as marginal abatement costs in the case of the electric power sector in Japan, employing a directional output distance function. It is found that the shadow prices are US$39 per tonne for carbon dioxide and US$1531 per liter for low-level waste. Secondly, we calculate the indirect Morishima elasticity between carbon dioxide and low-level waste in order to identify their substitutability, and it is found that the substitution of low-level waste for carbon dioxide is easier than the reverse. This result suggests that, with the amount of generated electricity fixed, carbon dioxide can be substituted more easily by low-level waste when the relative price of carbon dioxide increases, for example, as a result of implementation of a carbon dioxide tax or an emissions trading system.