Abstract
This paper employs the quadratic directional output distance function to derive shadow prices of China’s aggregate carbon emissions at the province level between 1997 and 2010. The empirical results indicate that the national weighted average shadow price presents an “N-shape” curve across the sample period, experiencing the initial phase of growth followed by a phase of deterioration, and then a further increase. This change trend implies that the cost of carbon emissions reduction is increasing. In addition, the shadow price varies significantly across provinces, which means that China should uphold the principal of “common but differentiated responsibilities” in regional carbon emissions reduction. Generally, the shadow price of the east provinces with high economic development is markedly higher than that of the west provinces with low economic development. The OLS regression results indicate that the shadow price positively connected with the regional economic development levels. Moreover, an inflection point exists in the relation curve between the shadow price and GDP per capita, that is, the increase rate of the shadow price becomes small when the GDP per capita is less than 18.1 thousand Yuan, while it becomes large when the GDP per capita surpasses 18.1 thousand Yuan. With the economic growth, the cost of carbon emissions reduction would be significantly increased. The empirical results can provide more insight for policymakers.
Highlights
China’s significant economic growth simultaneously results in the rapid rise in energy consumption and carbon emissions
Shale gas is considered the most possible alternative to effectively substitute for the fossil energy in the future, the substitution effect is trivial since the output of shale gas is very low compared with the total energy consumption in
To dig into the differences of shadow price at the provincial level over time, we choose a sample of 30 provinces during the period of 1997–2010
Summary
China’s significant economic growth simultaneously results in the rapid rise in energy consumption and carbon emissions. Since undesirable outputs like carbon dioxide cannot be reasonably priced in accordance with general commodities, the carbon emissions abatement cost have not been included in the accounting system in China. The directional output distance function is increasingly influential in estimating shadow price of pollutants [11]. It appeals to the environmental policies because of allowing the expansion of desirable outputs and the reduction of undesirable outputs simultaneously. Choi employed the slacks-based DEA model to estimate the marginal abatement costs of CO2 emissions for China’s 30 provinces during 2001–2010 [17]. This paper attempts to employ a parametrized directional output distance function to estimate shadow prices of China provincial CO2 emissions from 1997 to 2010.
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