Into the unknown: shadow prices associated with direct carbon emissions in the Spanish hotel sector

Abstract

This paper estimates the efficiency of hotels considering their direct carbon emissions as undesirable outputs. Furthermore, we estimate the shadow prices associated with these pollutants, which represent the additional investments necessary to reduce them. We apply a Bayesian random parameters approach, which enables us to account for the technological heterogeneity existent in the sector. This method allows us to estimate not only hotel efficiency but also the aforementioned shadow prices. Our empirical sample comprises 156 Spanish hotels for the year 2021. Results show that the selected model correctly handles the presence of technological heterogeneity and the incorporation of carbon emissions. Although the efficiency of Spanish hotels is high, the shadow prices of the direct carbon emissions are other than zero. Therefore, Spanish hoteliers should invest to decrease their emissions. Some practical implications are given based on these results.