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

analysis while electricity (or power) generated is the desirable output. As
mentioned the sample consists of plants of various vintages, some plants
are new and are constructed with relatively better and efficient
technologies and thus emit less CO2 than the plants which are very old
and pollute more per unit of output. In order to differentiate plants that
are old and have not installed any equipment to control their emissions
i.e., the dirty plants, from the plants that use new technology which is
less polluting and plants which have old technology but have installed
equipment or have taken additional measure to restrict emissions and
hence pollute less i.e., the cleaner plants, a dummy variable⁵ is
introduced in the model. The output distance function is initially
estimated without making any distinction between the dirty and cleaner
plants. This is our Model-1. The estimation of the output distance
function is again carried out, now by incorporating the dummy variable to
distinguish the dirty plants from the cleaner ones. This is called Model-2.
The estimated parameters of both the models are presented in Table 3.

Table 3: Estimated Parameters

Note: In Model 2 we have used Dummy D = 1 for plants which are dirty and
used dated technology and D = 0 for plants which are clean.

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