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Measuring the cost of environmentally sustainable industrial development in India: a distance function approach

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  • Murty, M.N.
  • Kumar, Surender

Abstract

This paper attempts to estimate the maintenance cost of water pollution abatement measures to the Indian industry using the methodology of distance function in the theory of production. The distance function is estimated using both programming and stochastic frontier models for a sample of water polluting industries in India. The firm-specific shadow prices for pollutants, measures of efficiency, and scale economies are estimated. Estimates show that on average the cost to the Indian industry for reducing one ton of BOD and COD are respectively, Rs 0.246 and 0.077 million. Large differences in the estimates of firm-specific shadow prices of pollutants reflect the use of inefficient water pollution abatement technologies. The relationships between firm-specific shadow prices or marginal costs of abatement of BOD and COD and the index of compliance (ratio of effluent load to sale value) and the pollution load reductions obtained confirm the earlier empirical results of studies on water pollution abatement in Indian industries. The earlier studies have found increasing marginal costs with respect to reductions in pollution concentrations and decreasing marginal cost with respect to the pollution loads reduced by the firms.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Environment and Development Economics.

Volume (Year): 7 (2002)
Issue (Month): 03 (July)
Pages: 467-486

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Handle: RePEc:cup:endeec:v:7:y:2002:i:03:p:467-486_00

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Cited by:
  1. Sushama Murty & R. Robert Russell & Steven B. Levkoff, 2011. "On modeling pollution-generating technologies," Discussion Papers 1101, Exeter University, Department of Economics.
  2. Khuda Bakhsh, . "Economic and Environmental Impacts of Bt Cotton: Evidence from Pakistan," Working papers 2, The South Asian Network for Development and Environmental Economics.
  3. María A. González & Rigoberto A. Lopez, 2007. "Political Violence and Farm Household Efficiency in Colombia," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 367-392.
  4. Murty, Sushama, 2010. "On the theory of a firm : The case of by-production of emissions," The Warwick Economics Research Paper Series (TWERPS) 934, University of Warwick, Department of Economics.
  5. Muneesh Kumar & Padmasai Arora, 2010. "Bank efficiency measurement using alternative techniques of frontier analysis: evidence from India," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 2(1), pages 40-69.
  6. Cuesta, Rafael A. & Lovell, C.A. Knox & Zofío, José L., 2009. "Environmental efficiency measurement with translog distance functions: A parametric approach," Ecological Economics, Elsevier, vol. 68(8-9), pages 2232-2242, June.
  7. Wang, Q.W. & Zhou, P. & Shen, N. & Wang, S.S., 2013. "Measuring carbon dioxide emission performance in Chinese provinces: A parametric approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 21(C), pages 324-330.
  8. Halkos, George & Tzeremes, Nickolaos, 2011. "Does the Kyoto Protocol Agreement matters? An environmental efficiency analysis," MPRA Paper 30652, University Library of Munich, Germany.
  9. Gupta, Manish, 2005. "Estimation of marginal abatement costs for undesirable outputs in India's power generation sector: An output distance function approach," Working Papers 05/27, National Institute of Public Finance and Policy.
  10. M. Murty & Surender Kumar & Kishore Dhavala, 2007. "Measuring environmental efficiency of industry: a case study of thermal power generation in India," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(1), pages 31-50, September.
  11. Kakali Mukhopadhyay & Souvik Bhattacharya, 2006. "Estimation of Marginal Abatement Cost of Air Pollution in Durgapur City of West Bengal," Working Papers 2006-013, Madras School of Economics,Chennai,India.
  12. Kumar, Surender & Gupta, Sreekant, 2004. "Resource use efficiency of US electricity generating plants during the SO2 trading regime: A distance function approach," Working Papers 04/17, National Institute of Public Finance and Policy.
  13. Sushama Murty, 2012. "On the Theory of By-Production of Emissions," Discussion Papers 1202, Exeter University, Department of Economics.
  14. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.

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