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Measuring Marginal Abatement Costs in the Indian Thermal Power Sector: A By-production Approach

Author

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  • Sushama Murty
  • Resham Nagpal

Abstract

This paper estimates the marginal abatement costs (MACs) for CO2 emission in the Indian coal-based thermal power sector employing a non-parametric by-production approach. The estimates so obtained are compared with those from weak and joint-disposability-based approaches. In contrast to the other two approaches, by-production approach computes the MAC as the reduction in electricity generation necessitated by a reduction in coal (heat) input when emission generation is reduced by one unit. Under this approach, the estimates of the reduction in heat input per-unit reduction in emission generation lie in a small range around the same computed for the true data-generating process. The MACs varied widely between 58.92 and 102.28 USD/metric-ton of CO2, with a mean value of 85 USD/metric-ton in 2015, indicating a tremendous potential for emission trading or a Pigouvian tax as policy tools for correcting the allocative inefficiencies in this sector.

Suggested Citation

  • Sushama Murty & Resham Nagpal, 2021. "Measuring Marginal Abatement Costs in the Indian Thermal Power Sector: A By-production Approach," Data Envelopment Analysis Journal, now publishers, vol. 5(2), pages 413-454, August.
    • Handle: RePEc:now:jnldea:103.00000043
    DOI: 10.1561/103.00000043
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