Marginal CO 2 and SO 2 Abatement Costs and Determinants of Coal-Fired Power Plants in China: Considering a Two-Stage Production System with Different Emission Reduction Approaches

Bei Gao and Zuoren Sun ()
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Bei Gao: School of Business, Shandong University, Weihai 264209, China
Zuoren Sun: School of Business, Shandong University, Weihai 264209, China

Energies, 2023, vol. 16, issue 8, 1-26

Abstract: Marginal abatement cost (MAC) plays an essential role in pricing pollutants and guiding environmental policies. Considering the heavy polluting nature of China’s coal power industry, this paper aims at providing companies and policymakers with more comprehensive information on the cost of abatement by estimating the MACs of CO 2 and SO 2 for coal-fired power plants (CFPPs) in China. This study contributes to the literature by considering an interconnected two-stage production system to investigate. The estimation framework is advanced in combining the electricity production and pollution abatement process of CFPPs into a convex quantile regression (CQR) model. The results show that the averages of MAC for CO 2 and SO 2 are estimated to be 367.56 Yuan/ton and 662.30 Yuan/ton, respectively, indicating that the reduction of such emissions is still costly. The heterogeneous analysis then indicates that large CFPPs, central-government-owned power plants (CGOPPs), and low-regulated CFPPs tend to possess lower MACs for CO 2 . Regarding SO 2 , large and medium-sized power plants show significantly larger MACs than small plants. In addition, the MACs of SO 2 for CGOPPs and high-regulated CFPPs are more concentrated at high levels. In the second part, the Tobit regression analysis was used to discuss the determinants of MACs for CO 2 and SO 2 . Factors like carbon emission intensity, load, and operating hours can notably decrease MACs for CO 2 , while MACs for SO 2 tend to be positively affected by the total abatement cost and the abatement rate of the FGD equipment. In addition, the MACs for the large CFPPs, CGOPPs, and high-regulated CFPPs are more likely to be affected by the selected influence factors. Based on these results, we conclude with some policy recommendations.

Keywords: coal-fired power plants; two-stage production system; marginal abatement cost; end-of-pipe abatement; quantile regression (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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