Marginal Abatement Cost Research Articles

Estimation of abatement potentials and costs of air pollution emissions in China

Understanding the air pollution emission abatement potential and associated control cost is a prerequisite to design cost efficient control policies. In this study, a linear programming algorithm model, International Control Cost Estimate Tool, was updated with cost data for applications of 56 types of end-of-pipe technologies and five types of renewable energy in 10 major sectors namely power generation, industry combustion, cement production, iron and steel production, other industry processes, domestic combustion, transportation, solvent use, livestock rearing, and fertilizer use. The updated model was implemented to estimate the abatement potential and marginal cost of multiple pollutants in China. The total maximum abatement potentials of sulfur dioxide (SO2), nitrogen oxides (NOx), primary particulate matter (PM2.5), non-volatile organic compounds (NMVOCs), and ammonia (NH3) in China were estimated to be 19.2, 20.8, 9.1, 17.2 and 8.6 Mt, respectively, which accounted for 89.7%, 89.9%, 94.6%, 74.0%, and 80.2% of their total emissions in 2014, respectively. The associated control cost of such reductions was estimated as 92.5, 469.7, 75.7, 449.0, and 361.8 billion CNY in SO2, NOx, primary PM2.5, NMVOCs and NH3, respectively. Shandong, Jiangsu, Henan, Zhejiang, and Guangdong provinces exhibited large abatement potentials for all pollutants. Provincial disparity analysis shows that high GDP regions tend to have higher reduction potential and total abatement costs. End-of-pipe technologies tended be a cost-efficient way to control pollution in industries processes (i.e., cement plants, iron and steel plants, lime production, building ceramic production, glass and brick production), whereas such technologies were less cost-effective in fossil fuel-related sectors (i.e., power plants, industry combustion, domestic combustion, and transportation) compared with renewable energy. The abatement potentials and marginal abatement cost curves developed in this study can further be used as a crucial component in an integrated model to design optimized cost-efficient control policies.

Modelling environmental technical efficiency and phosphorus pollution abatement cost in dairy farms

The dairy sector is an important sector in Northern Ireland being the single largest contributor to its agricultural economy. However, the sector contributes more to soil phosphorus (P) surplus compared to other agricultural sectors. Consequently, the goal of this research is to analyse the environmental technical efficiency of dairy farms making use of a novel parametric hyperbolic distance function approach. The model is able to internalise P surplus as undesirable output in the dairy production process by treating desirable and undesirable outputs asymmetrically. The stochastic production frontier model is analysed simultaneously with an inefficiency model to explain variability in efficiency scores assuming the existence of heteroskedasticity in the idiosyncratic error term. Additionally, we estimated the shadow price and pollution cost ratio of P surplus in dairy farms. This paper contributes to the existing literature as it provides the first attempt to empirically estimate the pollution abatement cost of P surplus in dairy farms. Besides, the hyperbolic environmental technology distance function methodology employed to achieve the study objectives is less restrictive compared to the radial output/input distance function approach employed in previous studies. This allows for the estimation of a more robust environmental efficiency measure and shadow price of P surplus that is consistent with public policy goals that seek to simultaneously reduce pollution and increase production of desirable outputs. Our results showed that the average environmental technical efficiency estimates for dairy farms in Northern Ireland is 0.93 and the shadow price (marginal abatement cost) of P surplus evaluated at the mean is £12.29/kg. Intensification resulting in increased use of concentrates feed was found to be negatively related to environmental technical efficiency. We also found that age of the farmer and share of milk output have a positive relationship with environmental technical efficiency.

Marginal abatement cost, air pollution and economic growth: Evidence from Chinese cities

Abstract The directional distance function (DDF) with multiple bad outputs allows estimation of conditional marginal abatement cost (MAC) that would be more informative than the unconditional MAC estimated with a single pollutant. Applying a multi-pollutant parametric output DDF approach, we estimate the MACs of CO2, SO2, and NOx emissions for 105 Chinese cities in 2006–2014. It is found that the period medians of the MACs for the three emissions all increase over time, while the medians of the MACs for different cities tend to vary significantly. A goodness-of-fit criterion is developed and used to evaluate the fit of alternative models, which demonstrates the superiority of the multi-pollutant model. We have also shown that there exists a positive relationship between MAC and economic growth. Finally, several policy implications are suggested for reducing the overall emission abatement costs of China.

Overlapping Efforts in the EU Emission Trading System

According to the Phase IV (2021-2030) rules of the EU ETS, the total amount of emissions permits allocated to firms is not fixed but endogenous. This implies that a national climate policy that overlaps with the emission trading system can have an impact on total aggregate emissions. Roughly speaking, if firms increase their holdings of emission permits, the total amount of emissions allocated is reduced. This paper investigates analytically how an overlapping national policy affects the decision of an individual firm and the whole industry to bank emission permits. If marginal abatement costs are not too convex, national climate policies increase banking and thus tend to reduce overall emissions. This effect, however, is reduced in times of low interest rates.

The Macroeconomic Impact of Europe's Carbon Taxes

Policy makers often express concern about the impact of carbon taxes on employment and GDP. Focusing on European countries that have implemented carbon taxes over the past 30 years, we estimate the macroeconomic impacts of these taxes on GDP and employment growth rates for various specifications and samples. Our point estimates suggest a zero to modest positive impact on GDP and total employment growth rates. More importantly, we find no robust evidence of a negative effect of the tax on employment or GDP growth. We examine evidence on whether the positive effects might stem from countries that used the carbon tax revenues to reduce other taxes; while the evidence is consistent with this view, it is inconclusive. We also consider the impact of the taxes on emission reductions and find a cumulative reduction on the order of 4 to 6 percent for a $40/ton CO2 tax covering 30% of emissions. We argue that reductions would likely be greater for a broad-based U.S. carbon tax since European carbon taxes do not include in the tax base those sectors with the lowest marginal costs of carbon pollution abatement. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The Political Economy of Negotiating International Carbon Markets

International carbon markets are frequently propagated as an efficient instrument for reducing CO2 emissions. We argue that such markets, despite their desirable efficiency properties, might not be in the best interest of governments who are guided by strategic considerations in negotiations. We identify the circumstances under which governments benefit or are harmed by cooperation in the form of an international market. Our results challenge the conventional wisdom that an international market is most beneficial for participating countries when they have vastly diverging marginal abatement costs; rather, it may be more promising to negotiate agreements with non-tradable emissions caps.

Optimal carbon allowance price in China’s carbon emission trading system: Perspective from the multi-sectoral marginal abatement cost

China’s carbon emission trading system (ETS) was officially launched at the end of 2017 to further promote carbon emissions mitigation. In the ETS, the carbon price is the key factor determining whether the emission reduction target can be achieved. The optimal carbon price is the smallest marginal abatement cost that can achieve the emission reduction target. This study simulates the marginal abatement cost curves of different sectors in China’s ETS and calculate the optimal carbon price of sector coverage scenarios based on the criteria that involve eight sectors in turn. The results show that the marginal abatement cost decreases with increasing sector involvement. The optimal carbon price to achieve the two intensity targets at the same time is between 345 yuan/ton and 1140 yuan/ton. From the sectoral perspective, the power sector undertakes the largest emission reduction, while the transportation sector is responsible for smaller emission reduction. China’s ETS will cause GDP losses from 1.63% to 2.27% compared with the BAU scenario, but it can achieve CO2 reduction from 9.56% to 10.13%.

Exploring cost-effective transitions to fossil independent transportation in the future energy system of Denmark

In this paper, in the light of national targets of a fossil independent future Danish energy system, cost-effective deep decarbonisation solutions in transportation have been explored under base-, alternative technical-, and policy scenarios in the TIMES modelling environment. The TIMES-DK model was further developed to concurrently represent all emerging transport technologies (ETTs) in road- and off-road transport applications, disaggregated transport technologies and service demands segmentation to capture consumers preferences and heterogeneity, and to endogenise fuel infrastructures. The model runs optimise the societal surplus in between 2010 and 2050. There is a particular focus on the role of gas in transport. The results reveal that in between 2020 and 2040, natural gas (NG) could cost-efficiently serve as a transition fuel. Decarbonisation pace and fuel infrastructure assumptions were found to have a large impact on the NG adoption levels. This study showed that the combined use of liquid biofuels (mainly biomethanol), upgraded biogas, electricity, and hydrogen fuels would deliver cost-effective deep decarbonisation by 2050; however, their various decarbonisation roles vary within and across transport segments. Depending on the decarbonisation pace, a marginal CO2 abatement cost of 419–549 €/ton (or 1–1.29 €/L gasoline) is required by 2050 in Denmark. The results also showed that 25% and 30% cost reductions of BEVs and hydrogen fuel cell vehicles (HFCVs), compared to our central cost assumptions, would increase their respective adoption by 36% and 66% towards 2050. They show high market shares particularly in the medium size segment than in the small and large segments. Competition for limited biomass resources coupled with higher fuel demand results in adoption of ETTs.

The hotspots, reference routes, and research trends of marginal abatement costs: A systematic review

Abstract As one of the most effective means of evaluating environmental policies, marginal abatement costs (MACs) have been adopted in a growing body of research. This study characterizes the MAC-related literature from 1993 to 2018 on Web of Science based on a systematic review, bibliometric analysis, and mind-mapping. The results classify the research hotspots into influential factors, methods, and empirical applications. The three most frequently mentioned influential factors are technical change, discount rates, and energy prices. Compared with top-down models, bottom-up models, including engineering model and expert-based method, are the most widely used; improvements in the former focus on strengthening market behavior effect, while those in the latter aim to overcome the weaknesses of negative costs and lack of interaction across measures. MAC applications focus on environmental policies with two new research areas recently emerging: co-benefits and sectoral abatement costs. Furthermore, a reference route is proposed by summarizing the applicability of methods and matching relationships among influential factors, methods, and empirical problems. Finally, potential research directions are summarized based on the identified research hotspots and a similar co-word analysis in marginal cost field, such as considering the effects of both multiple influential factors and the interaction among factors on MACCs.

India in the Coming Climate G2?

China and the United States are the two largest emitters of greenhouse gases, making them pivotal players in global climate negotiations. Within the coming decade, however, India is set to become the most important counterpart to the United States, as it overtakes China as the country with the most at stake depending on the type of global burden-sharing agreements that reached, thus becoming a member of the “Climate G2.” We analyse financial flows that are necessary to equilibrate marginal abatement costs across countries and regions under a wide range of burden-sharing agreements: from pure grandfathering based on current emissions to equal per-capita allocation. Among the four largest players, the United States, the EU-27, China, and India, it is China that would currently be the largest net seller of emissions allowances in all but the grandfathered scenario. The United States would be the largest net buyer. However, India is poised to take China’s position by around 2030. That leaves the United States and India as the two major countries with most to gain and lose, depending on the type of climate deal reached.

Agricultural chemical oxygen demand mitigation under various policies in China: A scenario analysis

For many developing countries like China, agricultural production has been causing severe environmental issues, such as massive chemical oxygen demand (COD) emissions. However, limited studies have estimated regional total factor efficiency (TFE) and marginal abatement cost (MAC) of agricultural pollutants in developing countries. Multiple directional vectors have not been considered when using directional distance function approach to analyse agriculture production. In this study, we estimate TFE and MAC of COD emissions for the agricultural sector in China between 2006 and 2015. Three alternative scenarios, represented by three direction vectors, have been considered in a parametric directional approach. We find that there is no substantial efficiency improvement in China’s agricultural production when all resource use and output production are considered. Averagely, eastern coastal provinces perform much better than western inland provinces. The average MAC estimate across all three scenarios is 11,640 yuan/tonne. In addition, the MAC curves under three scenarios are generally characterised by increasing trends during 2006–2015. Abatement cost profiles are also characterised by substantial regional heterogeneity in MAC. Provinces in the East region have lower abatement costs than provinces in the West region. In general, our analysis suggests that there is space for China to achieve simultaneous improvements in agricultural production, pollution reduction, and resource saving, and agriculture is a potentially more cost-effective sector to reduce COD emissions compared to other sectors.

How will the Chinese national carbon emissions trading scheme work? The assessment of regional potential gains

The implementation of a national emissions trading scheme (ETS) in China is likely to have an important effect on potential regional gains. This study proposes a unified analytical framework for anticipating such gains in 2020 and estimates the key factors involved using data envelopment analysis based models. The results indicate that: (1) when the value of the marginal abatement cost is higher than the carbon price, no regions will have an incentive to reduce emissions by technological improvements. The only source of direct potential gains is from the amounts of carbon quota. (2) As carbon price increases from CNY 10 to 4000 per ton, the indirect potential gains will increase because the strategies for carbon reduction are technological innovation or limit economic activities. However, Jiangsu and Shanghai will suffer potential losses even though the price is high because they have no more carbon reduction potential. (3) Most central provinces will have potential gains when the carbon price is lower in ETS, while regions rich in fossil energy sources will suffer potential losses. However, a middle-price interval of CNY 1000–2000/ton is more rational, because it helps motivate market transactions and benefits low-carbon technological innovations.

Marginal abatement cost under the constraint of carbon emission reduction targets: An empirical analysis for different regions in China

As the global climate and environmental issues become increasingly serious, low-carbon development has become a consensus among countries to seek new economic growth pathway. As an important emitter of carbon dioxide, China has put forward “Thirteenth Five-Year Plan” (TFYP) outline that carbon dioxide emissions per unit of gross domestic product (GDP) will be 18% lower in 2020 than that in 2015. To measure the policy effects on CO2 emission reduction and abatement costs, the directional distance function model is introduced in this paper, and the sensitivity analysis is conducted to verify the rationality of our index formulation. The results show the areas with the highest carbon emission control target level have significantly higher marginal abatement costs than that of other areas. In the short term, the reduction targets policy effect on decreasing carbon abatement cost is not significant. Through sensitivity analysis, we further discovered that the carbon emission reduction cost is less sensitive to the carbon emission reduction target, and the impact in the short term is smaller. However, as time goes by, the impact increases. We suggest that the government should guide interregional enterprises to cooperate and play a synergistic role. Implementing the multilevel emission reduction targets and expanding the scope of trading in the national carbon trading market are especially important to optimize the allocation.

Heterogeneity in Economic and Carbon Benefits of Electric Technology Vehicles in the US.

To broadly contribute to sustainable mobility, electric technology vehicles (hybrid, electric, and plug-in-hybrid) must become more price competitive with internal combustion vehicles. This study assesses the economic and carbon benefits of electric technology vehicles in the U.S., accounting for household-by-household behavioral variability and geographical differences in fuel and electricity prices. This finer resolution provides insight into subsets of the population for whom adoption is economically or environmentally favorable, allowing us to construct marginal abatement cost curves for CO2 that account for geographic, behavioral, and stock heterogeneities. Currently, low gasoline prices and high initial expense means that, without subsidies, few consumers benefit financially from electric technology vehicles (1.7% of drivers). However, improved technology dramatically and nonlinearly increases both the number of consumers that benefit and corresponding carbon emissions that could be abated without government subsidy. Our results clarify cost targets that electric vehicle technology must achieve in order to deliver net financial and subsidy-free environmental benefits.

Greenhouse Gas Emissions in Dairy Goat Farming Systems: Abatement Potential and Cost.

Simple SummaryAgriculture and particularly livestock farming is associated with the production of certain gases that contribute to global warming, commonly referred to as greenhouse gases. These gases are the result of the use of machinery and other inputs such as fertilizers and pesticides or are associated with the digestion process of animals. In this work, we have analyzed data from dairy goat farms in Greece to estimate the amount of greenhouse gases per kilogram of milk produced and identify farming practices that can result in their reduction. We found that greenhouse gases per kilogram of milk are fewer in farms that are characterized by higher milk production per goat. Furthermore, certain practices like the use of homegrown feed instead of purchased feed and the use of compound feedstuffs or oil-rich feedstuffs like cottonseed cake can result in lower greenhouse gases in goat farms. Also, the analysis suggests that the reduction of greenhouse gases can lead to a reduction of farm income, especially in the case of intensive farms. This finding has to be taken into consideration by policy makers and possible measures to compensate for this income loss have to be explored.Dairy goat farming is an important agricultural activity in the Mediterranean region. In Greece the activity offers occupation and income to thousands of families mainly located in mountainous and semi-mountainous areas of the country where it utilizes low productivity pastures and shrub lands. Furthermore, goats are more resilient to climate changes compared to other species, and are often characterized as ideal for keeping in drought areas. However, there is still limited evidence on total greenhouse gases (GHG) emitted from goat farms and their mitigation potential. In this context, this study aims to estimate GHG emissions of goat farms in Greece and explore their abatement options using an economic optimization model. Three case studies are explored i.e., an extensive, a semi-intensive and an intensive goat farm that correspond to the main goat production systems identified in Greece. The analysis aims to assess total GHGs as well as the impact of abatement on the structures, gross margins and labor inputs of the farms under investigation. The issue of the marginal abatement cost is also addressed. The results indicate that the extensive farm causes higher emissions/kg of milk produced (4.08 kg CO2-eq) compared to the semi-intensive and intensive farms (2.04 kg and 1.82 kg of CO2-equivelants, respectively). The results also emphasize the higher marginal abatement cost of the intensive farm. In all farm types, abatement is achieved primarily through the reduction of the livestock capital and secondarily by other appropriate farming practices, like substitution of purchased feed with homegrown feed.

Stable International Environmental Agreements: Large Coalitions that Achieve Little

A standard result of coalition formation games is that stable coalitions are very small if the coalition plays Nash vis-à-vis the rest of the world and if abatement costs are quadratic. It has been shown that larger coalitions and even the grand coalition are possible if the marginal abatement cost is concave. The paper confirms this result, but shows that abatement activities by large coalitions smaller than the grand coalition can be very small. This can be ‘repaired’ only by assuming that the marginal abatement cost curve changes its curvature extremely once the stable coalition has been reached.

An experimental investigation of bilateral oligopoly in emissions trading markets

Market power in emissions trading has been extensively investigated because emerging markets for tradable emissions permits, such as the European Union's Emissions Trading Scheme (ETS), can be dominated by relatively few large sellers or buyers. Previous studies on market power in emissions trading have assumed the existence of a subset of competitive players. However, a key feature of emissions trading markets is that emissions permits are often traded by a small number of large sellers and buyers. Using a laboratory experiment, our objective in this paper is to test the performance of an emissions trading market utilizing a double auction in a bilateral oligopoly. Our results suggest that the theoretical bilateral oligopoly models can better describe market outcomes of emissions trading. The effects of the slope of the marginal abatement cost function on market power in laboratory experiments are found to be consistent with those predicted by the theoretical bilateral oligopoly model. How market power is exercised depends on the curvature of the abatement cost function. If the marginal abatement cost function of buyers (sellers) is less steep than that of sellers (buyers), the price of permits is lower (higher) than that under perfect competition. This is because the market power of buyers (sellers) exceeds that of sellers (buyers). The price of permits is close to the perfect competitive price when all traders have the sameslope of the marginal abatement cost function.

Tariffs and the Risk of Invasive Pest Introductions in Commodity Imports: Theory and Empirical Evidence

Expanded world trade carries with it increased risks of biological invasions and the ecological and economic damage that accompanies them. The economics literature has suggested that it might be desirable to use tariffs as corrective Pigouvian taxes to reduce those risks. This paper conducts a theoretical and empirical investigation of that proposition and provides the first comprehensive analysis of the potential effectiveness of tariffs as a measure to reduce the arrival of invasive pest species. A theoretical analysis focusing on individual shipments indicates that the effect of higher tariffs on invasive pest introductions is ambiguous and depends on whether marginal pest abatement cost is more or less responsive to changes in shipment volume and pest levels than is the marginal loss from expected pest interceptions. The theoretical framework provides the foundation for an econometric model of the effects of tariffs, shipment value, and duty free status on the risk of invasive pest introductions in import shipments of fruits and vegetables. We estimate the model using data from surveillance screening conducted by the Animal and Plant Health Service of the US Department of Agriculture from 2005-2014. Shipment data is used to separately estimate the responsiveness of the number of shipments to changes in the tariff rate and the removal of duty free status. The estimated parameters of these two models are then used to calculate the effects of raising tariff rates/removing duty free status on the probability of invasive pest detection and on the expected number of invasive pest detections per year for commodities differentiated by type, region of origin, growing season, and port of entry. For commodities currently facing positive tariffs our empirical analysis shows that tariff rates exert a negligible influence on the probability of detecting an invasive pest and on the annual number of shipments. Raising tariffs on these commodities would have a small effect on the expected number of invasive pest introductions. For commodities that currently enter duty free, our analysis suggests that removal of duty free status would reduce both shipments and intercept probabilities, thereby decreasing expected detections per year, especially for commodities currently responsible for the most pest intercepts. But removing duty free status from these commodities would likely undermine other goals of US trade policy as well as lowering consumer welfare due to higher fruit and vegetable prices and less variety in winter diets. We estimate trade elasticities for a subset of commodities and find the consumer welfare loss to be on the order of $14 million per expected intercept avoided.

Assessment of greenhouse gas mitigation options for the iron, gold, and potash mining sectors

Abstract The objective of this study is to investigate greenhouse gas mitigation pathways for the iron, gold, and potash mining sectors in Canada. These sectors have not widely accepted the available cleaner production strategies and so there is potential to reduce greenhouse gas emissions. It is important to fully realize this potential as soon as possible to support efforts to limit global warming. We conducted cost-benefit analyses of implementable greenhouse gas reduction strategies in order to inform policy and industry. Twenty-four greenhouse gas emission reduction options not yet implemented in Canada were identified following a review of current processes and operations at 102 mine sites. We developed a novel model to assess these options, integrating technology diffusion rates and long-term energy-environmental modelling. We found that the maximum greenhouse gas reduction potential can be realized through simultaneously implementing fifteen technology changes, eliminating 21 million tonnes of CO2 eq. by 2050. Furthermore, we showed that the marginal greenhouse gas abatement costs are negative, indicating that the industry would also achieve long-term cost savings if these changes were pursued. Implementing high pressure grinding rolls in iron mining and electric and diesel hybrid haul trucks in underground gold mining and potash mining have the most favorable greenhouse gas abatement costs of −4120, −3096, −701 $/tonne, respectively. These results show that these technology changes should be pursued since both environmental benefit and cost savings would be achieved.

A critical review of distance function based economic research on China’s marginal abatement cost of carbon dioxide emissions

The last few years have witnessed a rapidly emerging literature estimating the marginal abatement cost, or the shadow price of carbon dioxide (CO2) emissions in China using parametric or non-parametric distance function approaches. This is largely driven by the fact that China has become the world’s largest carbon emitter and thus faced mounting domestic and international pressure to mitigate emissions. There is an urgent policy need to model and predict the cost burdens of various mitigation scenarios. Consistent information about the marginal abatement cost of CO2 emissions plays a crucial role in addressing this need. However, the existing literature has suffered from various issues that have severely weakened the scientific support that these studies could potentially provide for sound policy making. This paper provides a thorough and critical review of this rapidly emerging literature and identifies important research directions that need the most attention from scholars.