Emission Abatement Costs Research Articles

Marginal abatement costs of CO2 emissions in the thermal power sector: A regional empirical analysis from China

Quantifying marginal abatement costs of CO2 emissions are beneficial to estimate mitigation potentials and costs of China's regional thermal power sector. Based on the panel data of 30 provinces from 2004 to 2013, this study estimates the technical efficiency, reduction potential, and marginal abatement costs of CO2 emissions from the thermal power sector in China using a parametric quadratic directional output distance function. A regression analysis is undertaken to identify the factors that drive marginal abatement costs. The main results are: (1)The mean value of directional output distance function in China's thermal power sector is 0.0449, indicating that inefficient production of Chinese thermal power sector accounts for 4.49%. CO2 emissions could be mitigated by accumulated 1.22 billion ton in the past ten year, which is approximate 4.49% of total CO2 emissions; (2)The national weighted average marginal abatement costs of CO2 emissions are 316.51 Yuan/ton which is far higher than carbon price in the current ETS (emission trading system) pilots in China, implying that carbon price does not inflect supply and demand of carbon allowance; (3)The regression results show that the marginal abatement costs positively connect with regional power scale, namely a 1% increase in power scale will result in a 13.8% increase. Technology level, coal supply and power structure are negatively correlated with marginal abatement costs, namely a 1% increase in technology level, coal supply and power structure will result respectively in a 30.41%, 4.38% and 77.7% decrease.

Marginal abatement costs of carbon dioxide emissions and its influencing factors: A global perspective

Reducing CO2 emissions has become a major and urgent environmental goal worldwide. In this paper, we sample the data of 41 regions (including 165 countries) from 2000 to 2014 and adopt a gravity model to obtain an overview of the global flows of CO2 emissions, energy consumption, the global economy and capital stock since the beginning of the 21st century. We then investigate global technical efficiency, reduction potential, shadow prices and factors influencing the marginal abatement costs of CO2 emissions based on a quadratic directional output distance function. The empirical results show the following: (1) the global centres of gravity for CO2 emissions, energy consumption and capital stock have accelerated their shift to the Asian inland in the 21st century, but the global centre of gravity for the economy did not show the same trend. (2) Global technical inefficiency demonstrates a U-shape, with a turning point in 2007. Average annual total global CO2 emissions could be reduced by 4482.28 Mt, and the global marginal abatement costs of CO2 emissions are approximately 673.74–697.73 USD/t. (3) The relationship between economic development and marginal abatement costs is represented by a U-shaped curve. The world is currently in the climbing phase of this curve, implying that controlling CO2 emissions is becoming more costly. Moreover, energy structure, industrial structure, and CO2 emissions are negatively correlated with marginal abatement costs. Finally, the financial crisis has had a significant effect on marginal abatement costs.

CO2 emission abatement cost and its decomposition: A directional distance function approach

Accurately estimating carbon dioxide (CO2) abatement costs, and effectively identifying the factors impacting those costs, can improve the applicability and effectiveness of policy implementation. This paper proposes a new method to estimate CO2 abatement costs (CAC) based on the directional distance function. The method theoretically decomposes CAC into carbon productivity and output elasticity of substitutions; this decomposition can identify the types of CAC. The method also investigates the effects of development mode selection on CAC, by selecting different directional vectors. Following the theoretical discussion, an empirical study is presented, focusing on high energy-consumption firms in the United States (U.S). The results were as follows. (1) In sustainable development mode, changes in the average CAC of all firms were caused both by carbon productivity and output elasticity of substitution. Carbon productivity dominated CAC differences among different firm types. (2) In general, the amelioration potential of firm technology and environmental management was gradually explored by firms during sample period; corresponding environmental regulatory strategies are needed for firms with different CAC characteristics. (3) Firms selecting different development modes will realize significant differences in CAC. Firms in the sustainable development mode had the highest CAC levels; however, this mode was best for achieving a win-win between economic benefits and environmental protection.

Assessing ammonia emission abatement measures in agriculture: Farmers' costs and society's benefits – A case study for Lower Saxony, Germany

Ammonia (NH3) emissions have adverse impacts on the environment and, being a precursor for fine particulate matter, also on human health. About 95% of NH3 emissions in Germany originate from agriculture, mainly from livestock husbandry. This case study is aimed at presenting an approach that evaluates NH3 emission abatement measures in agriculture regarding their abatement costs for farmers and their benefits for the society in terms of avoided external costs of health damages and loss of terrestrial biodiversity. Following the impact-pathway chain, an economic-ecological farm model for estimating NH3 emission reductions and abatement costs was combined with an environmental impact assessment model for estimating the benefits for human health and biodiversity. The case study analysed a variety of manure storage cover and application techniques in Lower Saxony, a region in the north-west of Germany with the highest livestock density in Germany and high NH3 emissions. In the reference situation, the damage costs of NH3 emissions were EUR 2.7 billion. The implementation of concrete storage covers and slurry injection, the most effective measures, reduced NH3 emissions by 25% and achieved net benefits of EUR 505 million. Farmers' abatement costs averaged over all farms ranged from EUR 3.6 to 6.8 per kilogramme NH3 reduced. The abatement costs per farm type ranged from EUR 2.4 to 16.6 for floating plastic covers and from EUR 2.2 to 11.4 for concrete covers. The abatement costs for floating plastic covers were lower for grazing livestock specialists, while the abatement costs for concrete covers were lower for pig specialists, poultry specialists and mixed farms. Farm type specific abatement costs for manure application techniques ranged from EUR 4.5 to 9.6 per kilogramme NH3 reduced with little variation between trailing shoe and cultivator/injector techniques. Abatement costs for trailing shoe application were lower than for cultivator/injector application for grazing livestock specialists, poultry specialists and mixed farms. The average benefits per kilogramme NH3 reduced were EUR 14.1 for health and EUR 10.4 for biodiversity, totalling EUR 24.5. As the benefits exceed the abatement costs for all measures analysed in this study, principally, they can be recommended for implementation. However, the variation in abatement potentials and costs per farm type indicate differences in suitability. While manure covers should above all be implemented by pig specialists because of their high abatement potential, manure application techniques should be implemented by grazing livestock specialists. Among manure storage covers, floating plastic covers are more favourable for grazing livestock specialists, whereas concrete covers are more suitable for all other farm types. The analysis with the farm model was considered more appropriate than recent analyses at technical or macroeconomic level, because the abatement costs reflect differences in farm types, detailed production processes and farmers' profit-maximising behaviour. Overall, it can be concluded that an assessment of NH3 emission abatement measures should be carried out for farm types and should consider impacts of NH3 emission abatement both on human health and biodiversity. The presented modelling approach enables to estimate abatement costs for farm types and benefits for human health and biodiversity. Cost-efficient NH3 emission abatement measures tailored to farm types can be identified and farm type specific regional abatement strategies can be developed.

Interests, Norms and Support for the Provision of Global Public Goods: The Case of Climate Co-operation

Mitigating climate change requires countries to provide a global public good. This means that the domestic cleavages underlying mass attitudes toward international climate policy are a central determinant of its provision. We argue that the industry-specific costs of emission abatement and internalized social norms help explain support for climate policy. To evaluate our predictions we develop novel measures of industry-specific interests by cross-referencing individuals’ sectors of employment and objective industry-level pollution data and employing quasi-behavioral measures of social norms in combination with both correlational and conjoint-experimental data. We find that individuals working in pollutive industries are 7 percentage points less likely to support climate co-operation than individuals employed in cleaner sectors. Our results also suggest that reciprocal and altruistic individuals are about 10 percentage points more supportive of global climate policy. These findings indicate that both interests and norms function as complementary explanations that improve our understanding of individual policy preferences.

Fixed Price Auction: A Simple Truth Telling Carbon Pricing Mechanism

This paper proposes a fixed price auction mechanism to overcome asymmetric information problem considering firms with heterogeneous emission abatement costs. When facing fixed price permit auction and emission trading market, firms will make trade-offs between buying permits at fixed price and buying permits from markets. Equilibrium results show that firms have enough incentives to tell the truth about their private emission cost information. The numerical simulation uses China’s real data to compare performances of fixed price auction scheme to pure price scheme and pure quantity scheme. Simulation results are consistent to theoretical predictions and fixed price auction scheme performs best among three schemes. This result gives quite important implication for China to build its national emission trading scheme.

An interval robust stochastic programming method for planning carbon sink trading to support regional ecosystem sustainability—A case study of Zhangjiakou, China

In this study, an interval two-stage robust optimization method (ITRM) is developed for planning carbon-emission trading between ecosystem and industrial systems under uncertainty. The developed ITRM incorporates interval-parameter programming (IPP) and two-stage stochastic programming (TSP) within a robust optimization (RO) framework to deal with uncertainties presented as both probabilities and intervals and to reflect economic penalties as corrective measures or recourse against any infeasibilities arising due to a particular realization of an uncertain event. Compared with the traditional TSP, ITRM can effectively reflect the risk generated by stochastic programming process and enhance the robustness of the model, such that it is suitable for risk-aversive planners under high-variability conditions. The ITRM is applied to a case of carbon sink trading of Zhangjiakou and carbon dioxide (CO2) emission planning under uncertainty. The results obtained reveal that carbon trading mechanism can greatly optimize the allocation of resources and reduce the cost of emission abatement. The results also reveal that the contribution of forest ecosystems to carbon sinks and ecosystem services than others. Moreover, the system benefit would decrease as the robustness level is raised. Results indicate that when the robustness level is relatively low, the decision makers would pay more attention to the economic benefit of the system and neglect the stability of the system.

Energy efficiency and marginal carbon dioxide emission abatement cost in urban China

Energy efficiency improvement and carbon emission reduction are two important ways to mitigate energy consumptions and global warming. This paper aims to examine energy efficiency and carbon dioxide (CO2) emissions abatement costs of city urban areas in China. To this end, an improved slacks-based measure approach is introduced, which considers the linkage between desirable and undesirable outputs. Then, measures of energy efficiency, CO2 emission abatement cost and comprehensive state index of CO2 emissions abatement cost and CO2 emissions reduction potential are defined. The proposed model is then applied to the dataset of 285 cities in China during 2008–2012. The results show that most city urban areas in China have relatively low energy efficiencies. Surprisingly, there are gradually narrowing gaps regarding mean energy efficiencies between areas during 2008–2012. Nevertheless, there are great disparities in energy efficiencies between cities within a typical area, and even a provincial region. It is found that CO2 emissions abatement cost in urban China exhibits an increasing trend during the study period. Also, significantly geographic disparities in abatement costs between areas, regions and cites are found. Specifically, energy efficiency has significantly positive correlation with the comprehensive state index in China. Some important findings and useful policy implications are achieved.

Cost-based modelling of optimal emission quota allocation

Given that a fixed national emission reduction target could be achieved by imposing emission quotas among multiple decision-making units under administration, a novel nonlinear programming approach is proposed in this paper to obtain an optimal emission quota allocation in a least-cost way. Marginal emission abatement cost curves are simulated based on the environmental performance and marginal emission abatement costs measured in a set of parametric directional output distance functions with multi-inputs and multi-outputs. Further, the proposed model is applied to empirically investigate the optimal carbon emission quota allocation for China’s building construction industry among thirty-three provinces in three different regions. The results indicate that the relatively developed eastern region in China has higher marginal emission abatement cost and can be imposed with more emission quotas, while the central and western regions can undertake more emission reduction. Approximately 74 million RMB can be saved by implementing the optimal emission allocation (proposed in this paper) as compared to a uniform emission quota allocation. The findings are of great theoretical, methodological, and practical significance for policymakers and social science researchers in terms of climate change mitigation.

The efficiency cost of protective measures in climate policy

Despite recent achievements towards a global climate agreement, climate action to reduce greenhouse gas emissions remains quite heterogeneous across countries. Energy-intensive and trade-exposed (EITE) industries in industrialized countries are concerned on stringent domestic emission pricing that puts them at a competitive disadvantage against producers of similar goods in other countries with more lenient emission regulation. This paper focuses on climate policy design in the United States of America (US) and compares the economic implications of four alternative protective measures for US EITE industries: (i) output-based rebates, (ii) exemptions from emission pricing, (iii) energy intensity standards, and (iv) carbon intensity standards. Using a large-scale computable general equilibrium model we quantify how these protective measures affect competitiveness of US EITE industries. We find that protective measures can improve common trade-related competitiveness indicators such as revealed comparative advantage or relative world trade shares but at the same time may lead to a decline in the output value for EITE industries because of negative income effects. The economy-wide cost of emission abatement under protective measures increase as compared to uniform emission pricing stand-alone such that the gains of protective measures for EITE exports may be more than compensated through losses in domestic EITE demand.

Marginal Abatement Cost of CO2 in China Based on Directional Distance Function: An Industry Perspective

Industrial sectors account for around 70% of the total energy-related CO2 emissions in China. It is of great importance to measure the potential for CO2 emissions reduction and calculate the carbon price in industrial sectors covered in the Emissions Trading Scheme and carbon tax. This paper employs the directional distance function to calculate the marginal abatement costs of CO2 emissions during 2005–2011 and makes a comparative analysis between our study and the relevant literature. Our empirical results show that the marginal abatement costs vary greatly from industry to industry: high marginal abatement costs occur in industries with low carbon intensity, and vice versa. In the application of the marginal abatement cost, the abatement distribution scheme with minimum cost is established under different abatement targets. The conclusions of abatement distribution scheme indicate that those heavy industries with low MACs and high carbon intensity should take more responsibility for emissions reduction and vice versa. Finally, the policy implications for marginal abatement cost are provided.

Environmental efficiency and abatement cost of China's industrial sectors based on a three-stage data envelopment analysis

China has gained the reputation of “global factory” due to its phenomenal industrial growth over the past decades. At the same time, its industrial energy consumption has resulted in serious environmental problems. Accordingly, there is an urgent and critical need to reduce industrial carbon emissions at a minimum cost without hampering the country's economic development. The dual targets for carbon emission intensity and amount from the 12th Five-Year (2011–2015) Plan make it necessary to investigate the environmental efficiency and reduction costs of different sectors. This study employs a three-stage data envelopment analysis model based on a directional distance function approach with radial and non-radial slacks of desirable and undesirable outputs considered to measure the environmental efficiency and marginal CO2 emission abatement costs of China's 37 two-digit industries during 2005–2014. Based on the environmental efficiency and abatement cost of the industrial sectors, we reached the following conclusions. First, the adjusted estimates differ significantly from the results that do not consider the influence of environmental factors, and it is essential to consider the heterogeneity of industries in proposing emission reduction strategies. In addition, the stimuli for the smelting and pressing of metal industries result in cost reduction and the supervision on the top nine emitters and the Equipment Manufacturing Industries should be strengthened. Finally, the industrial sectors with large abatement potential are classified into short-term and long-term key target industries according to the emission abatement cost analyses.

International environmental agreements with ancillary benefits: Repeated games analysis

Both ancillary and primary benefits, generated by climate change mitigation, are indispensable key factors to implement the full participation in international environmental agreement (IEA). This paper presents a new IEA model with ancillary benefits, using a repeated game with the linear and quadratic emission abatement cost functions of each country. This study also investigates the effect of ancillary benefits on the condition for full participation in IEA. Ancillary benefits function as a complementary device of punishment scheme for IEA. Our main results show that ancillary benefits can facilitate full participation in IEA, thus suggesting that they should be considered in climate change negotiations.

The carbon dioxide marginal abatement cost calculation of Chinese provinces based on stochastic frontier analysis

The Chinese government made a commitment to achieve a 40–45 % reduction in carbon emissions per unit of gross domestic product (GDP) by 2020 compared with 2005. Most provinces followed the national commitment due to unified task of 40–45 % reduction in carbon emissions. However, different industrial structures, energy consumption structures and natural resources endowment of each province vary the emission abatement costs. Each province should take the carbon dioxide abatement cost into consideration for the carbon dioxide reduction target. Data envelopment analysis (DEA) and linear programming (LP) methods were used to measure the marginal abatement cost in previous studies. In this paper, we built a quadratic parametric directional distance function (DDF) to measure the carbon dioxide marginal abatement cost of Chinese provinces. To overcome the flaw of ignoring random errors in previous research, this paper compared results of stochastic frontier analysis (SFA) method and DEA method. Because DEA method only considers the inefficiency and SFA method can distinguish the random error from inefficiency, the result of the average carbon dioxide marginal abatement cost of each province calculated by SFA was 55 % lower than DEA method. As the random error may be introduced by chosen function form, Spearman test and paired sample T test were used to test the correlation of two methods’ MAC results. The results show that the ranking order MAC results sequence of SFA method and DEA method is highly correlated. But the MAC value of SFA and DEA methods has significant difference. As half of the error comes from the random error, the MAC results calculated by SFA method are more precise than DEA method. So SFA method is more appropriate than DEA in this paper. This result reinforces the feasibility of the Chinese government carbon dioxide emission reduction target. However, this study proved that the carbon dioxide emissions and marginal abatement cost varied from province to province. Furthermore, there was no distinct correlation between carbon dioxide emissions and the marginal abatement cost. On the contrary, the marginal abatement cost was related to the industrial structures, energy consumption structures and natural resources endowment of each province. Therefore, two policy suggestions are proposed as CO2 emission reduction principle: First, central government should establish CO2 emission reduction targets based on MAC and local economic affordability. Second, resource endowments and embodied carbon transfer should be considered.

Carbon reduction cost estimating of Chinese coal-fired power generation units: A perspective from national energy consumption standard

The coal-fired power sector is the main source of CO2 emissions in China. This paper proposes a carbon abatement cost estimate model based on computing the emissions gap between the Chinese national energy consumption standards of units (NECS) and the units' coal consumption for per unit electricity supply (CCES). By applying the proposed model, the abatement costs of four coal-fired power generation units (600 MW USC, 1000 MW USC, 265 MW IGCC, 600 MW SC CFB) with or without Carbon capture and storage (CCS) are estimated in six combined scenarios. The results show that (1) the units' total cost would increase more than one time after conducting CCS while the unit cost of carbon emissions abatement would decrease more than 64%; (2) the 1000 MW USC unit with CCS has the largest carbon reduction potential and the lowest unit abatement cost among all units in all scenarios; (3) 265 MW IGCC unit would have no carbon reduction potential after 25 service years, and its service years may be shortened; and (4) the 256 MW IGCC and 600 MW SC CFB is the most sensitive to the average annual decline rate of NECS but the four units of installed CCS are not.

Potential carbon emission abatement cost recovery from carbon emission trading in China

Purpose This study aims to provide an estimation of carbon dioxide (CO2) emission abatement costs in China’s industry sector during the period of 2006-2010, and additionally provide an ex-post estimation of CO2 abatement cost savings that would be realized if carbon emission permits trading among different industry sectors of 30 provinces in China during the same period were allowed, to answer the question that whether the industrial carbon emission abatement cost can (partially) be recovered from carbon emission trading in China. Design/methodology/approach The joint production framework associated with the environmental technology is utilized for formulating the models for estimating abatement costs and simulating emission permits trading scheme. Several data envelopment analysis-based models that could deal with both the desirable and undesirable outputs within the above framework are utilized for abatement cost saving estimation. The weak disposability assumption and variable returns to scale assumption are applied in the modelling. Findings In China’s industry sector, during 2006-2010, the estimated CO2 emission abatement cost was 1,842 billion yuan, which accounts for 2.45 per cent of China’s total industrial output value; the emission abatement cost saving from emission permits trading would be 315 billion yuan, which accounts for 17.12 per cent of the emission opportunity abatement cost; and additional 1,065.95 million tonnes of CO2 emission reductions would be realized from emission permits trading, and this accounts for 4.75 per cent of the total industrial CO2 emissions. Research limitations/implications The estimation is implemented at the regional level, i.e. the emission permits trading subjects are the whole industry sectors in different Chinese provinces, because of the data limitation in this study. Further estimation could be implemented at the enterprise level to provide a deeper insight into the abatement cost recovery from emission permits trading. Practical implications The estimation models and calculation process introduced in this study could be applied for evaluating the efficiency and effectiveness of pollutant emission permits trading schemes from the perspective that whether these market-based abatement policy instruments help to realize the potential abatement cost savings. Originality/value To the best of the authors’ knowledge, no study has provided the estimation of CO2 emission abatement cost and the estimation of CO2 abatement cost saving effect from emission permits trading for China’s industry sector. This study provides the first attempt to fill this research gap.

Marginal abatement cost curve for wind power in China: a provincial‐level analysis

AbstractWind power has seen a remarkable growth in China since the Renewable Energy Law came into force in the beginning of 2006. However, the contribution and the economic cost of wind power development to reduce carbon emission at the provincial level are still unclear. This research combined geographic information system analysis and levelized production cost calculation to provide provincial‐level supply curve of carbon dioxide (CO2) mitigation by wind power in China. The results showed that wind power could be a very competitive mitigation option in China, with a potential to contribute 500 million tons of CO2 emission mitigation at an average abatement cost of 75 RMB/t of CO2 mitigation. The emission abatement cost and the potential to reduce carbon emission in different provinces may be used for national planning as well as for the allocation of investments.

A Class of Mechanisms for Financing a Green Fund Through Taxes on International Flights

In this article I propose and analyze a new class of mechanisms, called ‘Contribution Contingent Green Fund Mechanisms’. These mechanisms are based on the financing of a green fund through taxes on international flights. It has often been proposed to finance climate change mitigation (e.g. Keen, Strand 2012) or climate change adaptation (Mueller, Hepburn 2006) through taxes on international flights. However, to my knowledge it has not been explored through which mechanisms this could best be done. In part 1 we define various versions of the Contribution Contingent Green Fund (CCGF) Mechanism. The CCGF would reward countries that contribute funds to it for their climate change mitigation actions. An important aspect is whether these reward payments be based on quantities (carbon emissions) or prices (carbon prices). To obtain the payoffs in the various mechanisms we firstly estimate the matrix of emissions from international flights between all pairs of countries, secondly use available estimates for parameters in countries’ emissions abatement costs and thirdly develop models that enable us to compute the welfare effects of various aviation taxes. We compute the maximal emissions reductions that the different classes of mechanisms can achieve through Nash equilibria at which all countries participate. We also define and study an equilibrium selection concept that is based on the assumption that countries act in the participation game based on their myopic incentives. We prove some general results that suggest that the predictions obtained from this equilibrium selection concept provide a lower bound on the extent of participation that will occur.

How will auctioning impact on the carbon emission abatement cost of electric power generation sector in China?

China will enact a national emissions trading system in 2017. The rules for the initial allocation of emission allowances have not been settled yet. This paper assesses the effect of auctioning as an initial emission allowance allocation methods of the China electricity power generation sector. This study employs a combined model with modified Trans-log production function, dynamic simulation model and multi-objective linear programming to provide more realistic results. After estimating the optimal electric power sources structure and technological structure under different auctioning rates, this paper calculates the abatement cost of the China’s electric power generation sector. When the allowance is free, the carbon shadow price will be 206.12Yuan/ton. When 5% allowance is auctioned, the price will be 216.91Yuan/ton. When the auctioning rate increases, the carbon emission abatement cost increases accordingly, as does the growth rate. The results also show that when the allowance auction rate is 5%, the marginal abatement costs for coal-fired power generation and clean power generation are 0.123Yuan/kWh and 0.121Yuan/kWh respectively, and thus, the total additional cost of the electric power generation sector will increase by 0.244Yuan/kWh, which would be a heavy burden to China’s electric power generation sector and the forward progress of auctioning in the near future may be hindered.

Marginal abatement costs of greenhouse gas emissions: broadacre farming in the Great Southern Region of Western Australia

Broadacre agriculture is a major emitter of greenhouse gases (GHG). To improve efficiency of climate change policies, we need to know the marginal abatement costs of agricultural GHG. This article combines calculations of on‐farm GHG emissions with an input‐based distance function approach to estimate the marginal abatement costs for a broadacre farming system in the Great Southern Region of Western Australia. The results show that, in the study region, the average marginal abatement cost for the 1998–2005 periods was $29.3 per tonne CO2‐e. Farms with higher crop output shares were found to have higher marginal abatement costs. Overall, our results indicate that broadacre agriculture is among the lowest cost sources of GHG mitigation.