IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v290y2021ics0306261921002592.html
   My bibliography  Save this article

Emission abatement cost in China with consideration of technological heterogeneity

Author

Listed:
  • Wang, Ailun
  • Hu, Shuo
  • Lin, Boqiang

Abstract

Marginal emission abatement costs play an important role in the emission trading market and in the allocation of emission reduction allowances. The traditional methods for estimating marginal emission abatement costs do not account for technological heterogeneity, which leads to biased results. To solve this problem, an improved method that combines the clustering method with a parametric output directional distance function is proposed in this paper. This method integrates the economic proximity of each examined province into its assessment of the environmental production technology of the province and takes multiple pollutants (CO2, SO2 and NOX) into consideration. Based on this method, in this paper, the environmental performance of 30 provinces in China from 2006 to 2017 is measured, the marginal emission abatement cost of CO2 is estimated, and a nonlinear programming method is used to study the optimal allocation of emission reduction in China. The results indicate the following: First, categorizing the provinces according to their economic proximity results in groups that differ greatly from geographically based groups. Second, the average inefficiency of these 30 Chinese provinces is 2.551%, which is less than that estimated by the methods that do not consider heterogeneity. Third, China’s average marginal CO2 abatement cost is 797.79 CNY/ton, and it exhibits a growing trend. Finally, compared to the grandfathering rule, the optimal quota allocation proposed by this paper can save approximately 797.793 billion CNY.

Suggested Citation

  • Wang, Ailun & Hu, Shuo & Lin, Boqiang, 2021. "Emission abatement cost in China with consideration of technological heterogeneity," Applied Energy, Elsevier, vol. 290(C).
    • Handle: RePEc:eee:appene:v:290:y:2021:i:c:s0306261921002592
    DOI: 10.1016/j.apenergy.2021.116748
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261921002592
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2021.116748?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yujiro Hayami, 1969. "Sources of Agricultural Productivity Gap Among Selected Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 51(3), pages 564-575.
    2. Burtraw, Dallas & Krupnick, Alan & Palmer, Karen & Paul, Anthony & Toman, Michael & Bloyd, Cary, 2003. "Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 650-673, May.
    3. Zhou, X. & Fan, L.W. & Zhou, P., 2015. "Marginal CO2 abatement costs: Findings from alternative shadow price estimates for Shanghai industrial sectors," Energy Policy, Elsevier, vol. 77(C), pages 109-117.
    4. Fassio, Claudio & Montobbio, Fabio & Venturini, Alessandra, 2019. "Skilled migration and innovation in European industries," Research Policy, Elsevier, vol. 48(3), pages 706-718.
    5. Tziogkidis, Panagiotis & Philippas, Dionisis & Leontitsis, Alexandros & Sickles, Robin C., 2020. "A data envelopment analysis and local partial least squares approach for identifying the optimal innovation policy direction," European Journal of Operational Research, Elsevier, vol. 285(3), pages 1011-1024.
    6. Xiong, Ling & Shen, Bo & Qi, Shaozhou & Price, Lynn & Ye, Bin, 2017. "The allowance mechanism of China’s carbon trading pilots: A comparative analysis with schemes in EU and California," Applied Energy, Elsevier, vol. 185(P2), pages 1849-1859.
    7. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 87-117.
    8. Wei, Chu & Löschel, Andreas & Liu, Bing, 2013. "An empirical analysis of the CO2 shadow price in Chinese thermal power enterprises," Energy Economics, Elsevier, vol. 40(C), pages 22-31.
    9. Wang, Ailun & Hu, Shuo & Lin, Boqiang, 2021. "Can environmental regulation solve pollution problems? Theoretical model and empirical research based on the skill premium," Energy Economics, Elsevier, vol. 94(C).
    10. Rolf Färe & Shawna Grosskopf & Carl A. Pasurka & William L. Weber, 2012. "Substitutability among undesirable outputs," Applied Economics, Taylor & Francis Journals, vol. 44(1), pages 39-47, January.
    11. Oh, Dong-hyun, 2010. "A metafrontier approach for measuring an environmentally sensitive productivity growth index," Energy Economics, Elsevier, vol. 32(1), pages 146-157, January.
    12. Li, Jianglong & Sun, Chuanwang, 2018. "Towards a low carbon economy by removing fossil fuel subsidies?," China Economic Review, Elsevier, vol. 50(C), pages 17-33.
    13. Wang, Ailun & Lin, Boqiang, 2020. "Structural optimization and carbon taxation in China's commercial sector," Energy Policy, Elsevier, vol. 140(C).
    14. Philippe Aghion & Xavier Jaravel, 2015. "Knowledge Spillovers, Innovation and Growth," Economic Journal, Royal Economic Society, vol. 0(583), pages 533-573, March.
    15. Murty, M.N. & Kumar, Surender, 2002. "Measuring the cost of environmentally sustainable industrial development in India: a distance function approach," Environment and Development Economics, Cambridge University Press, vol. 7(3), pages 467-486, July.
    16. Lin, Boqiang & Du, Kerui, 2013. "Technology gap and China's regional energy efficiency: A parametric metafrontier approach," Energy Economics, Elsevier, vol. 40(C), pages 529-536.
    17. Cui, Lian-Biao & Fan, Ying & Zhu, Lei & Bi, Qing-Hua, 2014. "How will the emissions trading scheme save cost for achieving China’s 2020 carbon intensity reduction target?," Applied Energy, Elsevier, vol. 136(C), pages 1043-1052.
    18. Li, Zhi & Ouyang, Xiaoling & Du, Kerui & Zhao, Yang, 2017. "Does government transparency contribute to improved eco-efficiency performance? An empirical study of 262 cities in China," Energy Policy, Elsevier, vol. 110(C), pages 79-89.
    19. Gene M. Grossman & Elhanan Helpman, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter.
    20. Fare, Rolf & Grosskopf, Shawna & Weber, William L., 2006. "Shadow prices and pollution costs in U.S. agriculture," Ecological Economics, Elsevier, vol. 56(1), pages 89-103, January.
    21. Ji, D.J. & Zhou, P., 2020. "Marginal abatement cost, air pollution and economic growth: Evidence from Chinese cities," Energy Economics, Elsevier, vol. 86(C).
    22. Zhang, H. & Fan, L.W. & Zhou, P., 2020. "Handling heterogeneity in frontier modeling of city-level energy efficiency: The case of China," Applied Energy, Elsevier, vol. 279(C).
    23. Lin, Boqiang & Du, Kerui, 2015. "Modeling the dynamics of carbon emission performance in China: A parametric Malmquist index approach," Energy Economics, Elsevier, vol. 49(C), pages 550-557.
    24. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, January.
    25. Zhang, Ning & Choi, Yongrok, 2013. "Total-factor carbon emission performance of fossil fuel power plants in China: A metafrontier non-radial Malmquist index analysis," Energy Economics, Elsevier, vol. 40(C), pages 549-559.
    26. Yangho Chung & Rolf Fare, 1995. "Productivity and Undesirable Outputs: A Directional Distance Function Approach," Microeconomics 9511002, University Library of Munich, Germany, revised 09 Nov 1995.
    27. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
    28. Lee, Chia-Yen & Zhou, Peng, 2015. "Directional shadow price estimation of CO2, SO2 and NOx in the United States coal power industry 1990–2010," Energy Economics, Elsevier, vol. 51(C), pages 493-502.
    29. Wang, Ailun & Lin, Boqiang, 2018. "Dynamic change in energy and CO2 performance of China's commercial sector: A regional comparative study," Energy Policy, Elsevier, vol. 119(C), pages 113-122.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huang, Junbing & Xiang, Shiqi & Wu, Panling & Chen, Xiang, 2022. "How to control China's energy consumption through technological progress: A spatial heterogeneous investigation," Energy, Elsevier, vol. 238(PC).
    2. Xu, Jie & Lv, Tao & Hou, Xiaoran & Deng, Xu & Li, Na & Liu, Feng, 2022. "Spatiotemporal characteristics and influencing factors of renewable energy production in China: A spatial econometric analysis," Energy Economics, Elsevier, vol. 116(C).
    3. Chen, Yu & Lin, Boqiang, 2021. "Understanding the green total factor energy efficiency gap between regional manufacturing—insight from infrastructure development," Energy, Elsevier, vol. 237(C).
    4. Huang, Junbing & Luan, Bingjiang & He, Wanrui & Chen, Xiang & Li, Mengfan, 2022. "Energy technology of conservation versus substitution and energy intensity in China," Energy, Elsevier, vol. 244(PA).
    5. Xu, Lan & Yang, Jun & Cheng, Jixin & Dong, Hanghang, 2022. "How has China's low-carbon city pilot policy influenced its CO2 abatement costs? Analysis from the perspective of the shadow price," Energy Economics, Elsevier, vol. 115(C).
    6. Yang, Lisha & Ni, Mengying, 2022. "Is financial development beneficial to improve the efficiency of green development? Evidence from the “Belt and Road” countries," Energy Economics, Elsevier, vol. 105(C).
    7. Huiping Wang & Peiling Liu, 2023. "Spatial Correlation Network of Energy Consumption and Its Influencing Factors in the Yangtze River Delta Urban Agglomeration," Sustainability, MDPI, vol. 15(4), pages 1-20, February.
    8. Wang, Ailun & Hu, Shuo & Li, Jianglong, 2021. "Does economic development help achieve the goals of environmental regulation? Evidence from partially linear functional-coefficient model," Energy Economics, Elsevier, vol. 103(C).
    9. Shi, Wei & Li, Wei & Qiao, Fuwei & Wang, Weijuan & An, Yi & Zhang, Guowei, 2023. "An inter-provincial carbon quota study in China based on the contribution of clean energy to carbon reduction," Energy Policy, Elsevier, vol. 182(C).
    10. Xuemei Yuan & Shuai Jin & Haibin Zhang, 2023. "Optimal Green Technology Choice for Firms under an Emission Trading Scheme: End-of-Pipe vs. Cleaner Production," Sustainability, MDPI, vol. 15(23), pages 1-19, November.
    11. Wang, Ailun & Hu, Shuo & Li, Jianglong, 2022. "Using machine learning to model technological heterogeneity in carbon emission efficiency evaluation: The case of China's cities," Energy Economics, Elsevier, vol. 114(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ji, D.J. & Zhou, P., 2020. "Marginal abatement cost, air pollution and economic growth: Evidence from Chinese cities," Energy Economics, Elsevier, vol. 86(C).
    2. Du, Limin & Hanley, Aoife & Wei, Chu, 2015. "Estimating the Marginal Abatement Cost Curve of CO2 Emissions in China: Provincial Panel Data Analysis," Energy Economics, Elsevier, vol. 48(C), pages 217-229.
    3. Du, Limin & Hanley, Aoife & Zhang, Ning, 2016. "Environmental technical efficiency, technology gap and shadow price of coal-fuelled power plants in China: A parametric meta-frontier analysis," Resource and Energy Economics, Elsevier, vol. 43(C), pages 14-32.
    4. Wang, Ailun & Hu, Shuo & Li, Jianglong, 2021. "Does economic development help achieve the goals of environmental regulation? Evidence from partially linear functional-coefficient model," Energy Economics, Elsevier, vol. 103(C).
    5. Zhang, Ning & Huang, Xuhui & Qi, Chao, 2022. "The effect of environmental regulation on the marginal abatement cost of industrial firms: Evidence from the 11th Five-Year Plan in China," Energy Economics, Elsevier, vol. 112(C).
    6. Zhou, Yi & Zhou, Wenji & Wei, Chu, 2023. "Environmental performance of the Chinese cement enterprise: An empirical analysis using a text-based directional vector," Energy Economics, Elsevier, vol. 125(C).
    7. 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.
    8. Zeng, Shihong & Jiang, Xue & Su, Bin & Nan, Xin, 2018. "China's SO2 shadow prices and environmental technical efficiency at the province level," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 86-102.
    9. Kumar, Surender & Jain, Rakesh Kumar, 2019. "Carbon-sensitive meta-productivity growth and technological gap: An empirical analysis of Indian thermal power sector," Energy Economics, Elsevier, vol. 81(C), pages 104-116.
    10. Zhang, Ning & Wang, Bing, 2015. "A deterministic parametric metafrontier Luenberger indicator for measuring environmentally-sensitive productivity growth: A Korean fossil-fuel power case," Energy Economics, Elsevier, vol. 51(C), pages 88-98.
    11. Silva, Felipe & Fulginiti, Lilyan E. & Perrin, Richard K., 2016. "Did technical change in agricultural production decrease the emission of pollutants on the Amazon Forest during 1990-2009?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230092, Southern Agricultural Economics Association.
    12. Zhang, Ning & Huang, Xuhui & Liu, Yunxiao, 2021. "The cost of low-carbon transition for China's coal-fired power plants: A quantile frontier approach," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
    13. Aparajita Singh & Haripriya Gundimeda, 2021. "Measuring technical efficiency and shadow price of water pollutants for the leather industry in India: a directional distance function approach," Journal of Regulatory Economics, Springer, vol. 59(1), pages 71-93, February.
    14. Yu, Yanni & Qian, Tao & Du, Limin, 2017. "Carbon productivity growth, technological innovation, and technology gap change of coal-fired power plants in China," Energy Policy, Elsevier, vol. 109(C), pages 479-487.
    15. Zhou, P. & Zhou, X. & Fan, L.W., 2014. "On estimating shadow prices of undesirable outputs with efficiency models: A literature review," Applied Energy, Elsevier, vol. 130(C), pages 799-806.
    16. Tang, Kai & Yang, Lin & Zhang, Jianwu, 2016. "Estimating the regional total factor efficiency and pollutants’ marginal abatement costs in China: A parametric approach," Applied Energy, Elsevier, vol. 184(C), pages 230-240.
    17. Bonilla, Jorge & Coria, Jessica & Sterner, Thomas, 2012. "Synergies and Trade-offs between Climate and Local Air Pollution: Policies in Sweden," Working Papers in Economics 529, University of Gothenburg, Department of Economics.
    18. Wen, Xiaojie & Yao, Shunbo & Sauer, Johannes, 2022. "Shadow prices and abatement cost of soil erosion in Shaanxi Province, China: Convex expectile regression approach," Ecological Economics, Elsevier, vol. 201(C).
    19. Dong-Hyun Oh & JongWuk Ahn & Sinwoo Lee & Hyundo Choi, 2021. "Measuring technical inefficiency and CO2 shadow price of Korean fossil-fuel generation companies using deterministic and stochastic approaches," Energy & Environment, , vol. 32(3), pages 403-423, May.
    20. Lin, Boqiang & Sai, Rockson, 2021. "A multi factor Malmquist CO2emission performance indices: Evidence from Sub Saharan African public thermal power plants," Energy, Elsevier, vol. 223(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:290:y:2021:i:c:s0306261921002592. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.