The Abatement Cost Simulation And Welfare Measurement In Provinces Of China Under Emission Trading Scheme

Global warming has aroused wide concern of international community,which has reached a consensus on the abatement of greenhouse gas emissions.Many countries has taken measures to reduce the emissions of carbon dioxide.China,one of the biggest carbon emitters in the world,is facing more pressure from international public opinion.Carbon Emission Trading is an effective emission-cutting measure based on market mechanism,therefore,it is regraded as an important policy instrument to reach the abatement target among governments.In 2016,China should have established a domestic market for trading carbon emissions.But the Chinese government has postpone the establishment of national carbon tading market several times,because the uncertainty of cost calculation and welfare.Therefore,the cost and welfare of carbon abatement in simulated scenarios of national carbon market,could help the government in establishing the national carbon market and setting suitable policy as soon as possible.In the national carbon trading market,the variations of different provinces' abatement cost are the precondition of carbon exchange.When the equilibrium market price is equal to the least marginal abatement cost,the carbon trading market would reach the effectiveness.Hence,it is reasonable to utilize marginal abatement cost as an instrument to analyze the policy effect of carbon trading market.Therfore,based on the research results at home and abroad,this paper set forth theories related to carbon market,then use parametric directional distance function model to derive the shadow prices of 29provinces from 2006 to 2015.Then the classic logarithmic model is used to simulate 29marginal abatement cost curves as setting the shadow price as dependent variable and the reduction rate of carbon intensity as independent variable.Further,the simulated MACC is applied to empirically investigate the abatement cost and welfare of 29 provinces in several scenarios of carbon trading market in China.In the end,the paper give some proposals regarding to China's ETS and carbon abatement target.The results indicate that marginal abatement cost would rise with the increasing of emission cuts and vary significantly among provinces,and undeveloped provinces have greater potential in emission reduction than eastern regions.Moreover,all provinces could benefit from the establishment of the nationwide ETS,but there is great discrepancy in provincial welfare in different simulated scenarios.Therefore,based on the premise of setting a suitable abatement target and making a fair allocation of CO₂ emission quota,China should promote the establishment of nationwide ETS as soon as possible.