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Regional differences in China's CO2 abatement cost

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  • He, Xiaoping

Abstract

Under a framework of output distance function with multiple outputs, the study discusses the carbon abatement cost at provincial and regional levels in China, using the shadow price analysis. The findings show that the abatement cost, reflecting the marginal opportunity cost of carbon reduction, varies greatly among the provinces. On average, the abatement cost of the eastern region was much higher than that of the mid-western region during the observed period. The findings provide evidence that the carbon prices in the current ETS pilots have been much lower than desired levels, implying inefficiency of the markets. The wide range of the abatement cost estimates supports that the equi-marginal principle does not hold for the regulations on carbon pollution at regional levels. The regional cost differences indicate the huge potential for China to minimize the total abatement cost with policy instruments that may motive the emissions moving from areas of low abatement cost to where the abatement cost is higher. For a few undeveloped provinces that are environmentally fragile and have high abatement cost, supplementary measures will be needed to reduce the negative impact of carbon cutbacks on the poor to the minimum.

Suggested Citation

  • He, Xiaoping, 2015. "Regional differences in China's CO2 abatement cost," Energy Policy, Elsevier, vol. 80(C), pages 145-152.
    • Handle: RePEc:eee:enepol:v:80:y:2015:i:c:p:145-152
    DOI: 10.1016/j.enpol.2015.01.044
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    More about this item

    Keywords

    Shadow price; Carbon abatement; Distance function;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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