Analysis On The Marginal Abatement Cost Of Carbon Dioxide Emissions At Provincial Levels In China

Climate change is an increasing concern of the international community. Countries in all parts of the world are making efforts to seek effective solutions to reduce greenhouse gas emissions. Carbon dioxide, a main constituent of greenhouse gases, has been considered to contribute the lion’s share in global warming. Since undesirable outputs like carbon dioxide are non-marketable and cannot be reasonably priced in accordance with general commodities, it is difficult to estimate the economic losses caused by emissions reduction. Therefore, extensive studies have been devoted to measuring the carbon emissions abatement cost in various ways.China has been the largest energy consumer and energy-related CO2emitter in the world. As a responsible country, China has promised to reduce its carbon intensity by40-45%by the year2020, compared with2005levels. However, either by reducing the good outputs, or introducing advanced equipment to reduce emissions, will increase more costs of the enterprises, smoothing the economic development. Therefore, to further measure the abatement cost of carbon emissions is helpful to propose reasonable carbon-reduction policies and then achieve emission reduction targets early.Thus, this paper derives the marginal abatement costs of China’s aggregate carbon dioxide emissions at provincial levels by using directional output distance function and Shephard output distance function, respectively. The dataset spans the11th Five-Year Plan (2006-2010), during which China seeks to promote energy conservation and emission reduction nationwide.The empirical results indicate that the marginal abatement costs estimated by the directional distance function with directional vector of (1,-1) are significantly higher than those estimated by Shephard output distance function, which implies that the green production technology is very expensive for the developing country of China. In addition, the marginal abatement costs of carbon emissions present a trend of steady growth during the sample period, which implies that it is increasingly costly for China to regulate CO2emissions. Moreover, the marginal abatement costs, which are positively correlated with regional economic development levels, are significantly different in different regions. Generally, the marginal abatement costs of the regions with high GDP per capita are relatively high. Correspondingly, those regions with low GDP per capita have lower abatement costs of carbon emissions.Based on the empirical results, the paper is devoted to proposing valuable suggestions for policy makers. China should uphold the principle of "common but differentiated responsibilities" to meet carbon emissions reduction target since the marginal abatement cost of carbon emissions varies significantly across provinces. All of regions should bear the responsibility to reduce carbon emissions, and the undeveloped regions can’t deal with climate change regardless of the economic development. The developed regions should take the lead in reducing emissions, and simultaneously share the marginal abatement costs for the undeveloped ones by providing technical and financial support.