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Shadow price of CO2 emissions in Indian thermal power sector

Author

Listed:
  • Rakesh Kumar Jain

    (Indian Railways
    University of Delhi, South Campus)

  • Surender Kumar

    (University of Delhi)

Abstract

This paper estimates production efficiency and shadow prices of CO2 emissions for coal-fired 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 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 by about 16 and 23% 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, reflect that the prevailing Clean Energy Cess of US$ 6.15 on a ton of coal or US$ 3.81 on a ton of CO2 emissions is not enough to induce the required emission mitigation. Significant variation in the estimates of shadow prices across the thermal power plants calls for use of economic instruments to reduce the emissions.

Suggested Citation

  • Rakesh Kumar Jain & Surender Kumar, 2018. "Shadow price of CO2 emissions in Indian thermal power sector," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 879-902, October.
    • Handle: RePEc:spr:envpol:v:20:y:2018:i:4:d:10.1007_s10018-018-0218-9
    DOI: 10.1007/s10018-018-0218-9
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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. Jindal, Abhinav & Nilakantan, Rahul & Sinha, Avik, 2024. "CO2 emissions abatement costs and drivers for Indian thermal power industry," Energy Policy, Elsevier, vol. 184(C).
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    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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    More about this item

    Keywords

    CO2 emissions; Shadow price; Directional distance function; Thermal power plants; India;
    All these keywords.

    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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