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The meta-technology cost ratio: An indicator for judging the cost performance of CO2 reduction

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  • Wu, Pei-Ing
  • Chen, Chai Tzu
  • Liou, Je-Liang

Abstract

This paper constructs an innovative ratio of meta-technology cost (MTCR) by combining the meta-frontier framework and shadow price model. This ratio is not only an indicator to account for country-specific technology heterogeneity or technology heterogeneity across a group of countries to measure improvement toward the meta-frontier. This ratio also computes the absolute value difference between the real and ideal minimum marginal abatement costs for the non-market good CO2 to achieve specific emission reduction. An equally weighted combination of technological readiness and innovation is used to classify countries into groups. The value of the MTCR via the computation of the meta marginal abatement cost (MACmeta) and group marginal abatement cost (MACgroup-k) allows us to identify the possible improvement of marginal abatement cost (MAC) in absolute value. That is, observation of the MTCR, along with its components the MACmeta and MACgroup-k, provides more intuitive and comprehensive information for commanding the cost performance of CO2 reduction than the traditional meta-technology ratio alone.

Suggested Citation

  • Wu, Pei-Ing & Chen, Chai Tzu & Liou, Je-Liang, 2013. "The meta-technology cost ratio: An indicator for judging the cost performance of CO2 reduction," Economic Modelling, Elsevier, vol. 35(C), pages 1-9.
  • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:1-9 DOI: 10.1016/j.econmod.2013.06.028
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    References listed on IDEAS

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    Cited by:

    1. Arjomandi, Amir & Seufert, Juergen Heinz, 2014. "An evaluation of the world's major airlines' technical and environmental performance," Economic Modelling, Elsevier, vol. 41(C), pages 133-144.
    2. repec:gam:jsusta:v:8:y:2016:i:3:p:219:d:64776 is not listed on IDEAS
    3. Ke Li & Malin Song, 2016. "Green Development Performance in China: A Metafrontier Non-Radial Approach," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-21, March.
    4. Wu, Pei-Ing & Chen, Chai Tzu & Cheng, Pei-Ching & Liou, Je-Liang, 2014. "Climate game analyses for CO2 emission trading among various world organizations," Economic Modelling, Elsevier, vol. 36(C), pages 441-446.
    5. Lukáš Rečka & Milan Ščasný, 2015. "Shadow prices of air pollutants in Czech industries: A convex nonparametric least squares approach," EcoMod2015 8523, EcoMod.

    More about this item

    Keywords

    Shadow price model; Directional distance function; Meta-frontier; Technological readiness; Innovation;

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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