Regulation of suspended particulate matter (SPM) in Indian coal-based thermal power plants

Date of Completion

January 2004


Economics, General|Energy




Air borne particulate matter, in major Indian cities is at least three times the standard prescribed by the WHO. Coal-based thermal power plants are the major emitters of particulate matter in India. The lack of severe penalty for non-compliance with the standards has worsened the situation and thus calls for an immediate need for investment in technologies to regulate particulate emissions. My dissertation studies the optimal investment decisions in a dynamic framework, for a random sample of forty Indian coal-based power plants to abate particulate emissions. I used Linear Programming to solve the double cost minimization problem for the optimal choices of coal, boiler and pollution-control equipment. A policy analysis is done to choose over various tax policies, which would induce the firms to adopt the energy efficient as well as cost efficient technology. The aim here is to reach the WHO standards. Using the optimal switching point model I show that in a dynamic set up, switching the boiler immediately is always the cost effective option for all the power plants even if there is no policy restriction. The switch to a baghouse depends upon the policy in place. Theoretically, even though an emission tax is considered the most efficient tax, an ash tax or a coal tax can also be considered to be a good substitute especially in countries like India where monitoring costs are very high. As SPM is a local pollutant the analysis here is mainly firm specific. ^