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A nonparametric method to estimate a technical change effect on marginal abatement costs of U.S. coal power plants

Maethee Mekaroonreung and Andrew Johnson

Energy Economics, 2014, vol. 46, issue C, 45-55

Abstract: The literature usually assumes that technical change reduces marginal abatement cost; however, recent results suggest that precisely the opposite occurs. This paper proposes a nonparametric method to determine the effect of technical change on marginal abatement cost. The method decomposes NOx marginal abatement cost changes in 2000–2004 and in 2004–2008 for 325 boilers operating in 134 U.S. bituminous coal power plant into technical and non-technical change effects. We find that technical change reduces the NOx marginal cost about 28.3% in 2000–2004 and 26.5% in 2004–2008. However, more stringent regulations enacted the NOx budget program results in lower NOx emission levels as plant operators install more advanced NOx abatement equipment which in turn causes an overall increase in marginal abatement cost.

Keywords: Multiplicative decomposition; Technical change; Marginal abatement cost; Sequential frontier estimation (search for similar items in EconPapers)
JEL-codes: C43 D24 Q55 (search for similar items in EconPapers)
Date: 2014
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