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The Shadow Price of CO2 Emissions in China's Iron and Steel Industry

Author

Listed:
  • Ke Wang
  • Linan Che
  • Chunbo Ma
  • Yi-Ming Wei

    () (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)

Abstract

As China becomes the world¡¯s largest energy consumer and CO2 emitter, there has been a rapidly emerging literature on estimating China's abatement cost for CO2 using a distance function approach. However, the existing studies have mostly focused on the cost estimates at macro levels (provinces or industries) with few examining firm-level abatement costs. No work has attempted to estimate the abatement cost of CO2 emissions in the iron and steel industry. Although some have argued that the directional distance function (DDF) is more appropriate in the presence of bad output under regulation, the choice of directions is largely arbitrary. This study provides the most up-to-date estimate of the shadow price of CO2 using a unique dataset of China's major iron and steel enterprises in 2014. The paper uses output quadratic DDF and investigates the impact of using different directional vectors representing different carbon mitigation strategies. The results show that the mean CO2 shadow price of China's iron and steel enterprises is very sensitive to the choice of direction vectors. The average shadow prices of CO2 are 407, 1226 and 6058 Yuan/tonne respectively for the three different direction vectors. We also find substantial heterogeneity in the shadow prices of CO2 emissions among China's major iron and steel enterprises. Larger, listed enterprises are found to be associated lower CO2 shadow prices than smaller, unlisted enterprises.

Suggested Citation

  • 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.
  • Handle: RePEc:biw:wpaper:105
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    File URL: http://ceep.bit.edu.cn/docs/2018-10/20181012075333173976.pdf
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Tang, Kai & Hailu, Atakelty, 2020. "Smallholder farms’ adaptation to the impacts of climate change: Evidence from China’s Loess Plateau," Land Use Policy, Elsevier, vol. 91(C).
    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. Zhang, Weijie & Zhang, Ning & Yu, Yanni, 2019. "Carbon mitigation effects and potential cost savings from carbon emissions trading in China's regional industry," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 1-11.
    5. Wang, Ke & Yang, Kexin & Wei, Yi-Ming & Zhang, Chi, 2018. "Shadow prices of direct and overall carbon emissions in China’s construction industry: A parametric directional distance function-based sensitive estimation," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 180-193.
    6. An, Runying & Yu, Biying & Li, Ru & Wei, Yi-Ming, 2018. "Potential of energy savings and CO2 emission reduction in China’s iron and steel industry," Applied Energy, Elsevier, vol. 226(C), pages 862-880.
    7. Di Maria, Corrado & Zarkovic, Maja & Hintermann, Beat, 2020. "Are Emissions Trading Schemes Cost-effective?," Working papers 2020/13, Faculty of Business and Economics - University of Basel.
    8. Adewale Henry Adenuga & John Davis & George Hutchinson & Trevor Donnellan & Myles Patton, 2019. "Environmental Efficiency and Pollution Costs of Nitrogen Surplus in Dairy Farms: A Parametric Hyperbolic Technology Distance Function Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1273-1298, November.
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    10. Yongrok Choi & Yanni Yu & Hyoung Seok Lee, 2018. "A Study on the Sustainable Performance of the Steel Industry in Korea Based on SBM-DEA," Sustainability, MDPI, Open Access Journal, vol. 10(1), pages 1-15, January.

    More about this item

    Keywords

    Directional distance function; Marginal abatement cost; Shadow price; Iron and steel; CO2 emissions; Heterogeneity;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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