Carbon emissions efficiency and abatement cost under inter-region differentiated mitigation strategies: A modified DDF model

Abstract

The assessment of carbon emissions efficiency and abatement cost is crucial to formulate environmental policies. We focus on this issue based on the consideration that different regions have alternative mitigation strategies, which be defined as “natural strategy” and “managerial strategy” in this study. In order to realize this, we develop a directional distance function (DDF) model under natural and managerial disposability to assess the carbon emission efficiency of China’s 29 regions from the 9th to 12th Five-Year Plan. Then the nonparametric method is applied to estimate directional distance function and evaluate the carbon abatement cost. The empirical results indicate that, comparing with our approach, traditional method may overestimate efficiency and underestimate abatement cost. Besides, China’s carbon emissions efficiency remains relatively stable from the 9th to 12th Five-Year Plan, and can be improved by at least 25%. In terms of abatement cost, the value under high regulation for most regions are higher than that under low regulation, which is 246 yuan/ton and 224 yuan/ton respectively, and shows a declined trend. Moreover, given the large gaps on abatement costs between different Chinese regions, it is necessary and possible for establishing a regional emissions trading system at national level.