Collaborative environmental management in the Pearl River Delta : an urban operation research approach for electricity consumption

Abstract

Electricity generation is the major emission source of air pollutants in the highly industrialized Pearl River Delta Region. In a compact region like the Pearl River Delta, pollutants can easily transfer from one city to another. The research question of this study is to construct an optimal and mutual agreeable scheme to reduce electricity consumption in the Pearl River Delta Region, which involves the collaboration of all cities in the Region. The main objective of the study is to conduct a cooperative scheme that internalizes the external social cost of electricity consumption through optimal electricity consumption reduction. This research first surveys papers on urban environmental problems, especially environmental problems caused in Pearl River Delta Region. Literature review indicates that public electricity generation is the major emission source of air pollutants in this region. Secondly, this research reviews literatures on the social costs of electricity consumption. Reviews show that external costs of electricity consumption in different countries differ widely, ranging from 13% to 700% of electricity price. This study adopts the lower quartile of this range, which is 13% of electricity price. Thirdly, urban operations research is reviewed, and a major policy instrument for environmental improvement, environmental tax, is investigated. This study develops a hierarchical structure of urban operations research to study the collaborative management of electricity consumption reduction in the Pearl River Delta Region. This urban operations research model includes seven essential steps: problem definition; objectives identification; performance measures; data analysis; analytical framework construction; model solution and courses of actions; and policy implementation. Moreover, this novel urban operations research model is applied in collaborative management of electricity consumption reduction in the Pearl River Delta. This research uses statistical and mathematical methods to estimate the parameters relevant to GDP, electricity consumption, external costs of electricity consumption, and environmental tax, and then formulates the operational model. Then, this model is employed to evaluate non-cooperative equilibrium condition among the eleven Pearl River Delta cities under a non-cooperative market outcome; to derive individual city’s external cost of electricity; to derive environmental levy and optimal electricity consumption reduction; and to design a compensation plan. In the compensation plan, under cooperation, in both 2013 and 2014, four cities (Guangzhou, Shenzhen, Foshan, and Dongguan) have to pay for their net spillover external cost of electricity consumption. The other seven cities (Zhuhai, Jiangmen, Huizhou, Zhaoqing, Hong Kong, Macao, and Zhongshan) would receive compensation. The urban operations research model for regional cooperation in electricity consumption reduction developed in this study provides an instrument to deal with the pollution problem in the Pearl River Delta Region. It facilitates the exploration of hitherto intractable problems in regional environmental cooperation and established solution plans. The urban operations model is expected to provide practical policy choices for a Pearl River Delta environmental collaboration scheme. This research represents the first attempt on an application of urban operations research model of collaborative management scheme of electricity consumption reduction in Pearl River Delta Region.