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Marginal Abatement Cost of CO 2 in China Based on Directional Distance Function: An Industry Perspective

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  • Bowen Xiao

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Dongxiao Niu

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Han Wu

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Haichao Wang

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

Abstract

Industrial sectors account for around 70% of the total energy-related CO 2 emissions in China. It is of great importance to measure the potential for CO 2 emissions reduction and calculate the carbon price in industrial sectors covered in the Emissions Trading Scheme and carbon tax. This paper employs the directional distance function to calculate the marginal abatement costs of CO 2 emissions during 2005–2011 and makes a comparative analysis between our study and the relevant literature. Our empirical results show that the marginal abatement costs vary greatly from industry to industry: high marginal abatement costs occur in industries with low carbon intensity, and vice versa. In the application of the marginal abatement cost, the abatement distribution scheme with minimum cost is established under different abatement targets. The conclusions of abatement distribution scheme indicate that those heavy industries with low MACs and high carbon intensity should take more responsibility for emissions reduction and vice versa. Finally, the policy implications for marginal abatement cost are provided.

Suggested Citation

  • Bowen Xiao & Dongxiao Niu & Han Wu & Haichao Wang, 2017. "Marginal Abatement Cost of CO 2 in China Based on Directional Distance Function: An Industry Perspective," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:1:p:138-:d:88103
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    References listed on IDEAS

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    2. Rakesh Kumar Jain & Surender Kumar, 2018. "Shadow price of CO2 emissions in Indian thermal power sector," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 879-902, October.
    3. Wei, Yigang & Liang, Xin & Xu, Liang & Kou, Gang & Chevallier, Julien, 2023. "Trading, storage, or penalty? Uncovering firms' decision-making behavior in the Shanghai emissions trading scheme: Insights from agent-based modeling," Energy Economics, Elsevier, vol. 117(C).
    4. Zhang, Weijie & Zhang, Ning & Yu, Yanni, 2019. "Carbon mitigation effects and potential cost savings from carbon emissions trading in China's regional industry," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 1-11.
    5. Jindal, Abhinav & Nilakantan, Rahul & Sinha, Avik, 2024. "CO2 emissions abatement costs and drivers for Indian thermal power industry," Energy Policy, Elsevier, vol. 184(C).
    6. Zhencheng Xing & Jigan Wang & Jie Zhang, 2017. "CO 2 Emission Performance, Mitigation Potential, and Marginal Abatement Cost of Industries Covered in China’s Nationwide Emission Trading Scheme: A Meta-Frontier Analysis," Sustainability, MDPI, vol. 9(6), pages 1-17, June.
    7. Sala-Garrido, Ramon & Mocholi-Arce, Manuel & Molinos-Senante, Maria & Maziotis, Alexandros, 2021. "Assessing the marginal cost of reducing greenhouse gas emissions in the English and Welsh water and sewerage industry: A parametric approach," Utilities Policy, Elsevier, vol. 70(C).

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