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Shadow Price of CO2 Emissions in Indian Thermal Power Sector

Author

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  • Rakesh Kumar Jain

    (Indian Railways & Department of Business Economics South Campus, University of Delhi)

  • Surender Kumar

    (Department of Economics, Delhi School of Economics)

Abstract

This paper estimates production efficiency and shadow prices of CO2 emissions for thermal power plants in India. It employs a unique sample of 56 power plants for 2000-2013 acquired primarily by invoking the Right to Information (RTI) Act, 2005. It estimates parametric quadratic directional output distance function using linear programming approach. We find that CO2 intensity of electricity generation could be reduced about 16 and 23 percent if the power plants were made to operate efficiently. The estimated average shadow prices of US$ 14.54 and 18.68 for a ton of CO2 emission, depending upon a plant’s strategies for enhancing electricity and reducing CO2 emissions, reflects that the prevailing Clean Energy Cess of US$ 6.15 a ton of coal or US$ 3.81 a ton of CO2 emissions is not enough to induce the required emission mitigation. Significant variation in the estimates of shadow prices calls for the application of economic instruments for cost effective reduction of the emissions.

Suggested Citation

  • Rakesh Kumar Jain & Surender Kumar, 2018. "Shadow Price of CO2 Emissions in Indian Thermal Power Sector," Working papers 287, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:287
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    References listed on IDEAS

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    1. Parikh, Jyoti & Panda, Manoj & Ganesh-Kumar, A. & Singh, Vinay, 2009. "CO2 emissions structure of Indian economy," Energy, Elsevier, vol. 34(8), pages 1024-1031.
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    4. M. Murty & Surender Kumar & Kishore Dhavala, 2007. "Measuring environmental efficiency of industry: a case study of thermal power generation in India," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(1), pages 31-50, September.
    5. Manish Gupta, 2006. "Costs of Reducing Greenhouse Gas Emissions: A Case Study of India’s Power Generation Sector," Working Papers 2006.147, Fondazione Eni Enrico Mattei.
    6. Bowen Xiao & Dongxiao Niu & Han Wu & Haichao Wang, 2017. "Marginal Abatement Cost of CO 2 in China Based on Directional Distance Function: An Industry Perspective," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-19, January.
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    8. Zhou, X. & Fan, L.W. & Zhou, P., 2015. "Marginal CO2 abatement costs: Findings from alternative shadow price estimates for Shanghai industrial sectors," Energy Policy, Elsevier, vol. 77(C), pages 109-117.
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    10. Yagi, Michiyuki & Hidemichi, Fujii & Hoang, Vincent & Managi, Shunsuke, 2015. "Environmental efficiency of energy, materials, and emissions," MPRA Paper 65358, University Library of Munich, Germany.
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    More about this item

    Keywords

    CO2 emissions; shadow price; directional distance function; thermal power plants; India;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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