Study on the estimation, decomposition and application of China's provincial carbon marginal abatement costs

Abstract

The characteristics of China's carbon emissions marginal abatement costs are investigated in this paper according to the following three objectives: (1) A modified directional distance function-data envelopment analysis is proposed to avoid non-positive carbon emissions marginal abatement costs. (2) A decomposition method is introduced to determine what factors will effect a change in the marginal abatement cost. (3) Marginal abatement cost curves are estimated to allocate the burden of emissions reduction for each province. The empirical results show the following: (1) Marginal abatement costs vary from province to province, and the average marginal abatement cost of China is approximately 1866.61 Yuan/ton. The energy intensity, dependence on foreign trade and industrial structure can significantly influence the carbon marginal abatement cost. (2) The decomposition results reveal that the overall technology advance has a negative effect on marginal abatement costs in most provinces. (3) The total reduction costs and inequality increased with time; hence, carbon emissions reduction targets should be reached as soon as possible. Additionally, areas with medium marginal abatement costs are the primary force for energy conservation and emissions reduction. Finally, based on the conclusions, policy implications are suggested to facilitate more effective implementation of carbon emissions reduction actions in China.