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



Economic theory suggests that equalisation of the marginal cost
of abatement across firms would minimise the total cost of abating
pollutants at an aggregate level. In the present exercise the estimated
shadow prices of the pollutant CO
2 vary across plants. The average
shadow price or the marginal abatement cost of CO
2 for the coal fired
thermal plants in India for the period 1991-92 to 1999-2000 being Rs.
3,380.59 per ton of CO
2 as per Model-1 and Rs. 2,401.99 per ton of CO2
as per Model-2. Considerable differences in the plant specific shadow
prices points towards inefficient use of abatement technology by the
thermal plants in India thereby building a case for using economic
instruments like pollution taxes or marketable pollution permits to
regulate/control pollution by the power plants instead of currently used
command and control instruments.

As regards the relationship between efficiency of the power
plants defined in terms of CO
2 emissions per unit of electricity output
generated and marginal cost of abating CO
2 is concerned, there exists a
direct correlation between the two. This implies that an efficient plant is
associated with a higher marginal cost of abating CO
2 and an inefficient
plant with a lower marginal cost of abatement. In other words, it becomes
increasingly difficult for a plant which emits less CO
2 per unit of its good
output to reduce one unit of its CO
2 emissions vis-à-vis plants that are
less efficient and hence emit more CO
2 per unit of good output. That is,
the marginal cost of abatement or the shadow price of the undesirable
output increases with the efficiency of the thermal plant.

25



More intriguing information

1. Parallel and overlapping Human Immunodeficiency Virus, Hepatitis B and C virus Infections among pregnant women in the Federal Capital Territory, Abuja, Nigeria
2. The name is absent
3. Dendritic Inhibition Enhances Neural Coding Properties
4. Strategic Planning on the Local Level As a Factor of Rural Development in the Republic of Serbia
5. The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?
6. A Dynamic Model of Conflict and Cooperation
7. EU enlargement and environmental policy
8. An Economic Analysis of Fresh Fruit and Vegetable Consumption: Implications for Overweight and Obesity among Higher- and Lower-Income Consumers
9. Mergers and the changing landscape of commercial banking (Part II)
10. The name is absent