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The Marginal Abatement Cost of Carbon Emissions in China

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  • Ma, Chunbo
  • Hailu, Atakelty

Abstract

There is an emerging literature estimating the marginal cost of carbon mitigation in China using distance function approaches; however, empirical estimates vary widely in magnitude and variation, which undermines support for policies to curb carbon emission. Applying three commonly used distance functions to China’s provincial data from 2001 to 2010, we show that the variability can be partially explained by the difference in the input/output coverage and whether the estimated marginal abatement cost (MAC) is conditional or unconditional. We also argue that the substantial heterogeneity in abatement cost estimates could be related to an economic interpretation that radial measures reflect the short-run MACs while non-radial measures reflect the long-run MACs. Our mean short-run MAC for carbon is 20 US$ per tonne, an amount that is very close to the carbon prices observed in China’s recently launched pilot markets.

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  • Ma, Chunbo & Hailu, Atakelty, 2015. "The Marginal Abatement Cost of Carbon Emissions in China," Working Papers 204973, University of Western Australia, School of Agricultural and Resource Economics.
    • Handle: RePEc:ags:uwauwp:204973
    DOI: 10.22004/ag.econ.204973
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    Cited by:

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    2. Qunli Wu & Shuting Gu, 2021. "Exploring the focus of future CO2 emission reduction in China's industrial sectors," Greenhouse Gases: Science and Technology, Blackwell Publishing, vol. 11(4), pages 682-696, August.
    3. Wu, Jianxin & Ma, Chunbo & Tang, Kai, 2019. "The static and dynamic heterogeneity and determinants of marginal abatement cost of CO2 emissions in Chinese cities," Energy, Elsevier, vol. 178(C), pages 685-694.
    4. Du, Limin & Lu, Yunguo & Ma, Chunbo, 2022. "Carbon efficiency and abatement cost of China's coal-fired power plants," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    5. Chen, Zhenling & Yuan, Xiao-Chen & Zhang, Xiaoling & Cao, Yunfei, 2020. "How will the Chinese national carbon emissions trading scheme work? The assessment of regional potential gains," Energy Policy, Elsevier, vol. 137(C).
    6. Wu, F. & Wang, S.Y. & Zhou, P., 2023. "Marginal abatement cost of carbon dioxide emissions: The role of abatement options," European Journal of Operational Research, Elsevier, vol. 310(2), pages 891-901.
    7. Ma, Chunbo & Hailu, Atakelty & You, Chaoying, 2019. "A critical review of distance function based economic research on China’s marginal abatement cost of carbon dioxide emissions," Energy Economics, Elsevier, vol. 84(C).
    8. Qunli Wu & Huaxing Lin, 2019. "Estimating Regional Shadow Prices of CO 2 in China: A Directional Environmental Production Frontier Approach," Sustainability, MDPI, vol. 11(2), pages 1-19, January.
    9. Jianxin Wu & Chunbo Ma, 2019. "The Convergence of China’s Marginal Abatement Cost of CO2: An Emission-Weighted Continuous State Space Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 1099-1119, April.
    10. Amzallag, Adrien, 2022. "Fund portfolio networks: A climate risk perspective," International Review of Financial Analysis, Elsevier, vol. 84(C).
    11. Veselov, Fedor & Pankrushina, Tatiana & Khorshev, Andrey, 2021. "Comparative economic analysis of technological priorities for low-carbon transformation of electric power industry in Russia and the EU," Energy Policy, Elsevier, vol. 156(C).
    12. Rekker, Lennard & Kesina, Michaela & Mulder, Machiel, 2023. "Carbon abatement in the European chemical industry: assessing the feasibility of abatement technologies by estimating firm-level marginal abatement costs," Energy Economics, Elsevier, vol. 126(C).
    13. Jianhuan Huang & Yantuan Yu & Chunbo Ma, 2018. "Energy Efficiency Convergence in China: Catch-Up, Lock-In and Regulatory Uniformity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(1), pages 107-130, May.
    14. Ke Wang & Linan Che & Chunbo Ma & Yi-Ming Wei, 2017. "The Shadow Price of CO2 Emissions in China's Iron and Steel Industry," CEEP-BIT Working Papers 105, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    15. Ye Wang & Yunguo Lu & Lin Zhang, 2021. "Opportunity Cost of Environmental Regulation in China’s Industrial Sector," IJERPH, MDPI, vol. 18(16), pages 1-19, August.
    16. Ji, D.J. & Zhou, P., 2020. "Marginal abatement cost, air pollution and economic growth: Evidence from Chinese cities," Energy Economics, Elsevier, vol. 86(C).
    17. Quinn, Barry & Gallagher, Ronan & Kuosmanen, Timo, 2023. "Lurking in the shadows: The impact of CO2 emissions target setting on carbon pricing in the Kyoto agreement period," Energy Economics, Elsevier, vol. 118(C).
    18. Asha Gunawardena, 2016. "Cost of Controlling Water Pollution and its Impact on Industrial Efficiency," Working Papers id:11537, eSocialSciences.

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    Keywords

    Environmental Economics and Policy; Resource /Energy Economics and Policy;

    JEL classification:

    • F0 - International Economics - - General

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