Measuring Environmental Efficiency of Industry: A Case Study of Thermal Power Generation in India
AbstractTechnical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology. The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency of a representative firm is estimated as 0.10 implying that the thermal power generating industry in Andhra Pradesh state of India could increase production of electricity by 10 per cent while decreasing generation of pollution by 10 percent. This result shows that there are incentives or win-win opportunities for the firms to voluntarily comply with the environmental regulation. It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms. The variation in marginal cost of pollution abatement and compliance to regulation across firms could be reduced by having economic instruments like emission tax.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 1693.
Date of creation: Apr 2006
Date of revision:
environmental and technical efficiency; shadow prices of bad outputs; air pollution;
Other versions of this item:
- 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.
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-02-10 (Agricultural Economics)
- NEP-ALL-2007-02-10 (All new papers)
- NEP-EFF-2007-02-10 (Efficiency & Productivity)
- NEP-ENE-2007-02-10 (Energy Economics)
- NEP-ENV-2007-02-10 (Environmental Economics)
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