Measuring Marginal Abatement Costs in the Indian Thermal Power Sector: A By-production Approach

Sushama Murty and Resham Nagpal

Data Envelopment Analysis Journal, 2021, vol. 5, issue 2, 413-454

Abstract: This paper estimates the marginal abatement costs (MACs) for CO2 emission in the Indian coal-based thermal power sector employing a non-parametric by-production approach. The estimates so obtained are compared with those from weak and joint-disposability-based approaches. In contrast to the other two approaches, by-production approach computes the MAC as the reduction in electricity generation necessitated by a reduction in coal (heat) input when emission generation is reduced by one unit. Under this approach, the estimates of the reduction in heat input per-unit reduction in emission generation lie in a small range around the same computed for the true data-generating process. The MACs varied widely between 58.92 and 102.28 USD/metric-ton of CO2, with a mean value of 85 USD/metric-ton in 2015, indicating a tremendous potential for emission trading or a Pigouvian tax as policy tools for correcting the allocative inefficiencies in this sector.

Keywords: Modelling pollution generating technologies; weak disposability; joint disposability; costly disposability; by-production approach; marginal abatement cost (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnldea:103.00000043

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