Promoting inter-regional cooperation to reduce CO2 abatement cost in China

Abstract

CO2 emissions reduction is a global challenge while the associated cost pressure presents a crucial issue. Within a country, each region, with different levels of abatement cost, may play different roles to achieve the national target of CO2 emissions reduction. Such heterogeneity could play a role in the cost efficiency of national CO2 emissions reduction, i.e. the minimum total abatement cost across the entire country. Previous models predominately focus on minimizing the total abatement cost, while the allocation of cooperative benefits is largely overlooked. We constructed a combined regional optimization and game model, i.e., the cooperative emission reduction model. The aim is to achieve the national carbon reduction target while reducing CO2 emissions at a minimum cost through inter-regional cooperation. In order to achieve cooperation, it is imperative to ensure that every participating region can benefit from cooperation. This study developed a cooperative emission reduction model based on the Shapley value method of game theory to determine the mechanism to distribute cooperation benefits amongst participating regions in fairness. Compared to the total costs before applying this model, 17.04 % ~ 33.62 % and 19.59 % ~ 24.62 % total CO2 abatement costs of China can be saved in 2025 and 2030, respectively. This method can be employed in other countries to assist policymakers to establish an appropriate goal for CO2 emission reduction, and formulate a compensation mechanism to promote inter-regional cooperation with fairness and minimum cost.