A BOOTSTRAP ASSESSMENT OF THE SHADOW PRICES OF CO2 FOR THE INDUSTRIAL SECTOR IN CHINA’S KEY CITIES

Mian Yang, Jiangchuan Xu, Menghan Li and Hongbo Duan
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Mian Yang: Center for Economic Development Research, Wuhan University, Wuhan 430072, P. R. China†Economics and Management School, Wuhan University, Wuhan 430072, P. R. China
Jiangchuan Xu: ��Economics and Management School, Wuhan University, Wuhan 430072, P. R. China
Menghan Li: ��Economics and Management School, Wuhan University, Wuhan 430072, P. R. China
Hongbo Duan: ��School of Economics & Management, University of Chinese Academy of Sciences, Beijing 100190, P. R. China

Climate Change Economics (CCE), 2021, vol. 12, issue 04, 1-25

Abstract: This study constructs a modified assessment model based on the bootstrap method to estimate the CO2 shadow prices for 35 typical cities’ industrial sectors in China from 2005 to 2018. Based on data from China’s seven pilot regional carbon markets, we evaluate the current CO2 trading price distortions. The empirical results indicate that during the study period, the average CO2 shadow price for the target cities is 1915.86 yuan per tonne, decreasing to 1880.57 yuan per tonne when using the bootstrap method for bias correction. The overall trends of CO2 shadow prices in most key cities are increasing given the strengthening of environmental regulations following the 11th Five-Year Plan. In addition, compared with the CO2 shadow prices in this paper, carbon trading prices in pilot cities present significantly negative distortions, which may fail to reflect the real opportunity cost of carbon abatement. Based on the findings of this study, several policy recommendations are proposed.

Keywords: Shadow price; bootstrap method; carbon price distortion; abatement cost (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:ccexxx:v:12:y:2021:i:04:n:s2010007821500159

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DOI: 10.1142/S2010007821500159

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