Data Envelopment Analysis Journal > Vol 5 > Issue 2

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

Sushama Murty, Centre for International Trade and Development, School of International Studies, Jawaharlal Nehru University, India, sushama.murty1@gmail.com , Resham Nagpal, Centre for International Trade and Development, School of International Studies, Jawaharlal Nehru University, India
 
Suggested Citation
Sushama Murty and Resham Nagpal (2021), "Measuring Marginal Abatement Costs in the Indian Thermal Power Sector: A By-production Approach", Data Envelopment Analysis Journal: Vol. 5: No. 2, pp 413-454. http://dx.doi.org/10.1561/103.00000043

Publication Date: 17 Aug 2021
© 2021 S. Murty and R. Nagpal
 
Subjects
Carbon regulation,  Environmental economics,  Economic theory
 
Keywords
Modelling pollution generating technologiesweak disposabilityjoint disposabilitycostly disposabilityby-production approachmarginal abatement cost
 

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In this article:
1 Introduction 
2 Departure from Standard Neo-classical Production Theory When Modelling Production of Bads 
3 The By-production Approach 
4 Computing MACs Using the By-production Approach 
5 Computing MACs under Weak and Joint-Disposability-Based Approaches Employing the Non-parametric DEA 
6 Data 
7 Results and Interpretations 
8 Conclusions 
Appendix 
References 

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.

DOI:10.1561/103.00000043