CO2 emissions abatement costs and drivers for Indian thermal power industry

Abstract

Indian power industry contributes nearly half of its overall CO2 emissions. In this study, we answer three related questions. First, what is the abatement cost of CO2 emissions for the Indian thermal power industry under three different policy scenarios - business as usual, emissions reduction only, and simultaneous emissions reduction and energy efficiency enhancement. Second, what are the determinants of these abatement costs of CO2 emissions. Third, which abatement policy scenario is more beneficial. For this, we employ a plant level dataset covering 93% of installed capacity and use a parametric quadratic directional output distance function to estimate marginal abatement costs by applying deterministic linear programming methods. Our findings are: First, the abatement costs range between US$ 46.43–71.11 per ton CO2, depending on the policy scenario chosen. Second, plant age, location, size, ownership, and CO2 intensity are all significant drivers of abatement costs. Third, while greater emissions reductions are possible under the emissions reduction only scenario vis-à-vis simultaneous emissions reduction and energy efficiency enhancement scenario, both scenarios are compatible with meeting the Paris agreement goals. This paper helps decision makers to allocate CO2 abatement targets to plants in line with their abatement costs and potential.