The Convergence of China’s Marginal Abatement Cost of CO2: An Emission-Weighted Continuous State Space Approach

Abstract

This paper develops a weighted continuous state space approach to convergence analysis and makes a first empirical attempt at examining the heterogeneity and convergence of China’s marginal abatement cost (MAC) of CO2 using a dataset of 286 cities during the years 2002–2013. The results show clear patterns of convergence in China’s MAC but substantial heterogeneity remains in the long run. Both joint and conditional emission-weighted distributions suggest less heterogeneity in abatement cost but greater potential for low-cost abatement opportunities than it appears in the commonly-presented unweighted distributions. The findings provide strong scientific support for China to take more proactive and aggressive measures to mitigate CO2 emissions.