A nonparametric method to estimate a technical change effect on marginal abatement costs of U.S. coal power plants

The literature usually assumes that technical change reduces marginal abatement cost; however, recent results suggest that precisely the opposite occurs. This paper proposes a nonparametric method to determine the effect of technical change on marginal abatement cost. The method decomposes NO_x marginal abatement cost changes in 2000-2004 and in 2004-2008 for 325 boilers operating in 134 U.S. bituminous coal power plant into technical and non-technical change effects. We find that technical change reduces the NO_x marginal cost about 28.3% in 2000-2004 and 26.5% in 2004-2008. However, more stringent regulations enacted the NO_x budget program results in lower NO_x emission levels as plant operators install more advanced NO_x abatement equipment which in turn causes an overall increase in marginal abatement cost.