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Marginal Abatement Cost of CO 2 in China Based on Directional Distance Function: An Industry Perspective

Bowen Xiao (), Dongxiao Niu (), Han Wu () and Haichao Wang ()
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Bowen Xiao: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Dongxiao Niu: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Han Wu: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Haichao Wang: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China

Sustainability, 2017, vol. 9, issue 1, 1-19

Abstract: Industrial sectors account for around 70% of the total energy-related CO 2 emissions in China. It is of great importance to measure the potential for CO 2 emissions reduction and calculate the carbon price in industrial sectors covered in the Emissions Trading Scheme and carbon tax. This paper employs the directional distance function to calculate the marginal abatement costs of CO 2 emissions during 2005–2011 and makes a comparative analysis between our study and the relevant literature. Our empirical results show that the marginal abatement costs vary greatly from industry to industry: high marginal abatement costs occur in industries with low carbon intensity, and vice versa. In the application of the marginal abatement cost, the abatement distribution scheme with minimum cost is established under different abatement targets. The conclusions of abatement distribution scheme indicate that those heavy industries with low MACs and high carbon intensity should take more responsibility for emissions reduction and vice versa. Finally, the policy implications for marginal abatement cost are provided.

Keywords: marginal abatement cost; CO 2 emissions; distance function; industrial sectors; abatement distribution scheme (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2017
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