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Shadow Price of CO 2 Emissions in Indian Thermal Power Sector

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  • Surender Kumar
  • Rakesh Kumar Jain

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 av erage shadow prices of US$ 14.54 and 18.68 for a ton of CO 2 emission, depending upon a plant ’ s strategies for enhancing electricity and reducing CO 2 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

  • Surender Kumar & Rakesh Kumar Jain, 2018. "Shadow Price of CO 2 Emissions in Indian Thermal Power Sector," Working Papers id:12791, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12791
    Note: Institutional Papers
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    Cited by:

    1. Kumar, Surender & Managi, Shunsuke & Jain, Rakesh Kumar, 2020. "CO2 mitigation policy for Indian thermal power sector: Potential gains from emission trading," Energy Economics, Elsevier, vol. 86(C).
    2. Sarangi, Gopal K. & Pradhan, Abhilas Kumar & Taghizadeh-Hesary, Farhad, 2021. "Performance assessment of state-owned electricity distribution utilities in India," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 516-531.
    3. Subhash C. Ray & Shilpa Sethia, 2024. "A state-level resource allocation model for emission reduction and efficiency improvement in thermal power plants," Indian Economic Review, Springer, vol. 59(1), pages 205-257, October.
    4. Surender Kumar & Rakesh Kumar Jain, 2021. "Cost of CO2 emission mitigation and its decomposition: evidence from coal-fired thermal power sector in India," Empirical Economics, Springer, vol. 61(2), pages 693-717, August.
    5. Aparajita Singh & Haripriya Gundimeda, 2021. "Measuring technical efficiency and shadow price of water pollutants for the leather industry in India: a directional distance function approach," Journal of Regulatory Economics, Springer, vol. 59(1), pages 71-93, February.
    6. Bei Gao & Zuoren Sun, 2023. "Marginal CO 2 and SO 2 Abatement Costs and Determinants of Coal-Fired Power Plants in China: Considering a Two-Stage Production System with Different Emission Reduction Approaches," Energies, MDPI, vol. 16(8), pages 1-26, April.
    7. Jindal, Abhinav & Nilakantan, Rahul & Sinha, Avik, 2024. "CO2 emissions abatement costs and drivers for Indian thermal power industry," Energy Policy, Elsevier, vol. 184(C).
    8. Kumar, Surender & Jain, Rakesh Kumar, 2019. "Carbon-sensitive meta-productivity growth and technological gap: An empirical analysis of Indian thermal power sector," Energy Economics, Elsevier, vol. 81(C), pages 104-116.
    9. Das, Sukanya & Murty, MN & Sardana, Kavita, 2021. "Using Economic Instruments to Fix the Liability of Polluters in India: Assessment of the Information Required and Identification of Gaps," Ecology, Economy and Society - the INSEE Journal, Indian Society of Ecological Economics (INSEE), vol. 4(02), July.
    10. Sushama Murty & Resham Nagpal, "undated". "Measuring marginal abatement costs in the Indian thermal power sector: A by-production approach," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 19-06, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    11. Yalan Shi & Miaojing Yu, 2021. "Assessing the Environmental Impact and Cost of the Tourism-Induced CO 2 , NO x , SO x Emission in China," Sustainability, MDPI, vol. 13(2), pages 1-19, January.
    12. Nakaishi, Tomoaki, 2021. "Developing effective CO2 and SO2 mitigation strategy based on marginal abatement costs of coal-fired power plants in China," Applied Energy, Elsevier, vol. 294(C).

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    Keywords

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    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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