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Measuring Environmental Efficiency of Industry: A Case Study of Thermal Power Generation in India

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Author Info
M N, Murty
Kumar, Surender
Dhavala, Kishore

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Abstract

Technical 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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1693.

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Date of creation: Apr 2006
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Handle: RePEc:pra:mprapa:1693

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Related research
Keywords: environmental and technical efficiency shadow prices of bad outputs air pollution.

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Find related papers by JEL classification:
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Palm, F.C., 1991. "To combine or not to combine? issues of combining forecasts," Papers 9122, Universite catholique de Louvain - Center for Operations Research and Economics (CORE).
  2. Hailu, Atakelty & Veeman, Terrence S, 2001. " Non-parametric Productivity Analysis with Undesirable Outputs: An Application to the Canadian Pulp and Paper Industry," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(3), pages 605-16, August. [Downloadable!] (restricted)
  3. Coelli, Tim & Perelman, Sergio, 1999. "A comparison of parametric and non-parametric distance functions: With application to European railways," European Journal of Operational Research, Elsevier, vol. 117(2), pages 326-339, September. [Downloadable!] (restricted)
  4. Kumar, Surender, 2006. "Environmentally sensitive productivity growth: A global analysis using Malmquist-Luenberger index," Ecological Economics, Elsevier, vol. 56(2), pages 280-293, February. [Downloadable!] (restricted)
  5. Grosskopf, S. & Hayes, K. & Hirschberg, J., 1995. "Fiscal stress and the production of public safety: A distance function approach," Journal of Public Economics, Elsevier, vol. 57(2), pages 277-296, June. [Downloadable!] (restricted)
  6. Drake, Leigh & Simper, R., 2003. "The measurement of English and Welsh police force efficiency: A comparison of distance function models," European Journal of Operational Research, Elsevier, vol. 147(1), pages 165-186, May. [Downloadable!] (restricted)
  7. Boyd, Gale A. & McClelland, John D., 1999. "The Impact of Environmental Constraints on Productivity Improvement in Integrated Paper Plants," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 121-142, September. [Downloadable!] (restricted)
  8. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June. [Downloadable!] (restricted)
  9. Greene, William H., 1990. "A Gamma-distributed stochastic frontier model," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 141-163. [Downloadable!] (restricted)
  10. Murty, M.N. & Kumar, Surender, 2002. "Measuring the cost of environmentally sustainable industrial development in India: a distance function approach," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 467-486, July. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. M N, Murty & Dhavala, Kishore Kumar & Ghosh, Meenakshi & Singh, Rashmi, 2006. "Social Cost-Benefit Analysis of Delhi Metro," MPRA Paper 1658, University Library of Munich, Germany. [Downloadable!]
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