The Economic Benefits versus Environmental Costs of India's Coal Fired Power Plants
57 Pages Posted: 19 Nov 2018
Date Written: November 9, 2018
Developing countries characterized by increasing electricity demand face a dilemma: fossil-fuel fired electricity production is cheap and reliable yet has substantial environmental consequences. This paper uses a difference-in-differences framework to quantify the economic costs versus environmental benefits of increases in coal-fired capacity on locations close to versus far away from power plants in India. Within this framework, we show that increases in coal-fired capacity result in sizable increases in air pollution and infant mortality. In contrast, coal-fired capacity increases have small, statistically insignificant impacts on local economic benefits, measured using data on district-level GDP as well as output, wages, and employment in the manufacturing and agricultural sectors. Combined, our results indicate that the environmental costs of coal-fired power plants vary substantially over space while the economic benefits associated with these plants are distributed equally across the state. This suggests that new coal-fired power plants should primarily be sited based on environmental costs.
Keywords: Coal, Electricity, India, Developing Countries, Environmental Costs, Air Pollution, Infant Mortality, Economic Benefits, Power Plant Siting
JEL Classification: I15, Q51, Q56, Q48
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