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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.

Suggested Citation

  • Ma, Chunbo & Hailu, Atakelty, "undated". "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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