Cities’ marginal carbon abatement costs’ heterogeneity and the potential benefits from emission trading schemes in the Yangtze River Delta Region

China had established the national carbon trading market. However, the market trading rate is low. In terms of a wider range of industries, trading entities, trading variations, and regulatory systems, the carbon trading market needs more investigation. The Yangtze River Delta (YRD) area can act as a pilot, providing valuable insights for the progress of the national carbon market. Consequently, the potential benefits from the regional carbon trading market need to be assessed. Using the parametric linear programming approach, the carbon marginal costs abatement (MAC) are calculated in this study using data from 41 cities in the Yangtze River Delta region between 2005 and 2019. Based on the carbon MAC we can determine if it is feasible and appropriate to establish a regional market in the YRD region. Then the potential benefit is estimated using the data envelopment analysis approach under the command-and-control mechanism (CCM) and the carbon emission trading scheme (ETS). We discovered that: (1) the carbon marginal abatement costs of cities in the YRD region vary greatly; (2) compared to the CCM model and ETS model, the developed ETS model with consideration of emission reduction dividend is more effective; (3) the ETS is beneficial for each province to fully exploit their own advantages and ultimately achieve coordinated regional development. We firstly recommend that policymakers develop tailored emissions reduction policies according to the carbon MAC of each province or city; secondly, promoting carbon emissions trading to cover other industries and entities in the YRD region can be explored as a pilot project. Following that, a nationally uniform and strongly market-oriented carbon emission trading system will be gradually established.