Estimation of marginal abatement costs for undesirable outputs in India's power generation sector: An output distance function approach.

(MW) as the capital variable following Kwon and Yun (1999). The data
on labour input cover both production and non-production (white-collar)
workers employed in the plant.

Outputs: The output variable consists of both desirable and undesirable
outputs. While electricity generated by the thermal plants is the desirable
output and is measured in megawatt hours (Mwh), CO2 emission is the
bad or undesirable output. We have used for the desirable output the
plant-wise electricity generation data which was made available by the
WBSEB, DVC and CESC for their respective thermal plants for the
period 1990-91 to 1999-2000.

Coal is burnt to generate electricity in the thermal plants. Since
in coal, carbon is bundled with ash, carbon, sulfur etc., its burning results
in the emission of carbon dioxide, particulate matters, NOx, etc., in the
atmosphere as pollutants. The emission of these pollutants in the
atmosphere can be regarded as a byproduct of electricity generation,
and thus is considered by us as undesirable outputs. The present study
considers carbon dioxide (CO2) as the only undesirable output. Data
relating to the emission of CO2 are not readily available, as most of the
thermal plants in India still do not measure the emissions of CO2. As a
result we have used the data on fuel consumption for generating the data
on CO2 emissions. Having obtained the plant wise data on consumption
of coal and fuel oil or LDO, we use fuel specific emission factors given by
the IPCC reference manual to derive plant wise total CO2 emissions. We
have also collected data on the calorific value of coal consumed by the
thermal plants in the sample and found that the coal supplied to these
thermal plants is of a higher grade and has a higher calorific value vis-à-
vis those used in most thermal plants in India. In the present study while
calculating plant-wise CO2 emissions from burning of coal, we have
incorporated the calorific value of different grades of coal consumed by
the power plants over the years and have adjusted the CO2 emission
factors provided by the IPCC reference manual accordingly.⁴

The descriptive data on the inputs and outputs are given in
Table 2. The standard deviations for all the variables are less than their
mean values, indicating that the plants are a relatively homogeneous
group (Hetemaki, 1996).

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