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Estimating the Marginal Abatement Costs of Carbon Dioxide Emissions in China: A Parametric Analysis

  • Limin DU
  • Aoife Hanley
  • Chu WEI

This paper investigates the technical inefficiency, shadow price and substitution elasticity of CO2 emissions of China based on a provincial panel for 2001-2010. Using linear programming to calculate a quadratic parameterized directional output distance function, we show that China’s technical inefficiency increases over the period implying further scope for CO2 emissions reduction in the medium and longer term at best by 4.5% and 4.9% respectively. Our results (notwithstanding regional differences) highlight increases in the shadow price of CO2 abatement (1000 Yuan/ton in 2001 to 2100 Yuan/ton in 2010). Additionally, increasingly steep substitution elasticity highlights the difficult reality of reducing China’s CO2 emissions

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File URL: https://www.ifw-members.ifw-kiel.de/publications/estimating-the-marginal-abatement-costs-of-carbon-dioxide-emissions-in-china-a-parametric-analysis/KWP_1883.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1883.

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Length: 32 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:kie:kieliw:1883
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  1. David Maradan & Anatoli Vassiliev, 2005. "Marginal Costs of Carbon Dioxide Abatement: Empirical Evidence from Cross-Country Analysis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(III), pages 377-410, September.
  2. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2007. "Environmental production functions and environmental directional distance functions," Energy, Elsevier, vol. 32(7), pages 1055-1066.
  3. Richard S. J. Tol, 1999. "The Marginal Costs of Greenhouse Gas Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 61-81.
  4. Zhang, ZhongXiang & Folmer, Henk, 1998. "Economic modelling approaches to cost estimates for the control of carbon dioxide emissions1," Energy Economics, Elsevier, vol. 20(1), pages 101-120, February.
  5. Coggins, Jay S. & Swinton, John R., 1996. "The Price of Pollution: A Dual Approach to Valuing SO2Allowances," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 58-72, January.
  6. Kaneko, Shinji & Fujii, Hidemichi & Sawazu, Naoya & Fujikura, Ryo, 2010. "Financial allocation strategy for the regional pollution abatement cost of reducing sulfur dioxide emissions in the thermal power sector in China," Energy Policy, Elsevier, vol. 38(5), pages 2131-2141, May.
  7. Reig-Martinez, Ernest & Picazo-Tadeo, Andres & Hernandez-Sancho, Francesc, 2001. "The calculation of shadow prices for industrial wastes using distance functions: An analysis for Spanish ceramic pavements firms," International Journal of Production Economics, Elsevier, vol. 69(3), pages 277-285, February.
  8. 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.
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