Efficient allocation of CO2 emissions in China: a zero sum gains data envelopment model

Abstract

The appropriate allocation of CO2 emission quotas can build up a solid foundation for future emissions trading. Building CO2 emissions allocation mechanism has significant practical implications. Based on radial zero sum gains data envelopment (ZSG-DEA) allocation model, this paper uses a non-radial ZSG-DEA model to allocate CO2 emissions between different Chinese provinces. Unlike previous studies treating CO2 as the input variable, we treat CO2 as the undesirable output variable. The modified model can better reflect macro-production process while earlier relevant models treated CO2 emissions as inputs. This paper contributes to the existing resource allocation method and allocates China's provincial CO2 emissions from the view of technical efficiency. The results of our paper reveal that (1) between 2006 and 2010 the cumulative optimal amounts of CO2 emissions were higher than the actual amounts in 12 provinces, and lower in other 18 provinces. (2) Several energy-abundant provinces such as Shanxi and Inter Mongolia need to take more responsibilities in CO2 emissions reduction. (3) After the ZSG-DEA allocation, all provinces' CO2 emissions are on ZSG-DEA frontier, which reflects the overall “Pareto Optimality”.