Measuring environmental efficiency of industry: a case study of thermal power generation in India |
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| Authors: | M N Murty Surender Kumar Kishore K Dhavala |
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| Institution: | (1) Institute of Economic Growth, Delhi University Enclave, Delhi, 110007, India;(2) Department of Policy Studies, TERI University, New Delhi, 110003, India |
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| Abstract: | Technical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that
accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology.
The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad
outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency
of a representative firm is estimated as 0.06 implying that the thermal power generating industry in Andhra Pradesh state
of India could increase production of electricity by 6/ while decreasing generation of pollution by 6%. This result shows
that there are incentives or win–win opportunities for the firms to voluntarily comply with the environmental regulation.
It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs
across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms.
This result calls for the use of economic instruments like pollution taxes instead of command and control regulation used
currently in India to reduce air pollution.
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| Keywords: | JEL Classification" target="_blank">JEL Classification Q 25 |
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