Co-Benefits of Internalizing Local Air Pollution Costs in India's Power Sector

Ryo Eto, Akinobu Murata, Yohji Uchiyama, and Keiichi Okajima


Power system planning, MARKAL model, India, co-benefit, local air pollution, CO2 emissions


Reducing harmful effects on human health has attracted much attention in the large cities of developing countries. Some measures for decreasing local air pollution accompany CO2 emissions reductions. This paper estimates the co-benefits of internalizing the marginal damage cost of local air pollution as an environmental tax in India’s power sector using a MARKAL model for the period 2006–2031. There scenarios are analyzed: business as usual (BAU), low tax, and high tax. Coal-based power genera-tion is dominant and SOx, NOx, and CO2 emissions in-crease in the BAU scenario. When the marginal damage cost of local air pollution is internalized to the power system cost, the power system changes dramatically and gas-based plants become dominant. SOx and NOxemissions decrease significantly owing to the installation of technology related to desulfurization and denitration, and fuel switching. This occurs earlier in the high tax scenario than in the low tax scenario. CO2 emissions increase in the middle term as a result of the efficiency loss caused by desulfurization and denitration technology. The co-benefits are found in the long term, as CO2 emissions decrease owing to fuel switching. Thus, when estimating the co-benefits of environmental policy, we should analyze the long-term effects.

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