Cost of CO2 emission mitigation and its decomposition: evidence from coal-fired thermal power sector in India

Surender Kumar and Rakesh Kumar Jain
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Rakesh Kumar Jain: Indian Railways

Empirical Economics, 2021, vol. 61, issue 2, No 6, 693-717

Abstract: Abstract We estimate carbon mitigation cost (CMC) and the factors determining change in CMC using environmental production function. The CMC index is defined as the ratio of maximum production of electricity under unregulated and regulated production technology. Change in CMC index is decomposed into technical change, scale change and change in the level of CO2 emissions. The production function is estimated for 45 coal-fired thermal power plants over the period of 2008–2012 using data envelopment analysis. Decomposition of CMC change reveals that impacts of changes in scale of operation and CO2 emissions were more than the reduced costs realized due to technical changes. We find that the sample plants in Indian coal-fired thermal power sector had to sacrifice about 3.5% of electricity production amounting to 2005US$ 1702 million of revenue loss over the 5 years due to regulation of CO2 emissions.

Keywords: Environmental production function; CO2 Emission mitigation cost; Decomposition; DEA; Thermal power plants (search for similar items in EconPapers)
JEL-codes: C61 D24 Q22 Q54 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Cost of CO2 Emission Mitigation and its Decomposition: Evidence from Coal-fired Thermal Power Sector in India (2020)
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DOI: 10.1007/s00181-020-01892-6

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