Convergence of Chinese urban carbon marginal abatement cost

Cenjie Liu, Rui Xie and Chunbo Ma

Applied Economics, 2025, vol. 57, issue 5, 525-542

Abstract: Heterogeneity in Chinese urban carbon marginal abatement cost (UCAC) is driven by an imbalance in urban economic development and resource endowments. Analysing the convergence of UCAC provides policy insights to the Chinese government for dual carbon targets and harmonizing carbon reduction efforts across regions cost-effectively. We construct a data envelopment analysis (DEA) model considering the materials balance principle (MBP) to analyse the relationship between desirable outputs and undesirable outputs in actual production processes. Furthermore, we calculate Chinese UCAC and conduct an in-depth analysis of its evolution using convergence models. The results reveal that UCAC in the central and western regions are higher than the national average, whereas, it is relatively low in the eastern region. The convergence analysis indicates that during the 12th Five-Year Plan (FYP) period, UCAC in the eastern and central regions exhibits $\sigma $σ convergence, whereas UCAC in the western region exhibits $\sigma $σ divergence during the whole sample period. We observe conditional $\beta $βconvergence in Chinese UCAC. This study highlights the need for the Chinese government to develop region-specific carbon reduction strategies that consider factors such as geographical location. Additionally, the convergence characteristics of UCAC provide an opportunity to establish a multi-regional carbon trading market.

Date: 2025
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DOI: 10.1080/00036846.2024.2305167

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