Estimation of marginal abatement costs of CO2 in Chinese provinces under 2020 carbon emission rights allocation: 2005-2020

Abstract

The calculation of marginal abatement costs of CO₂ plays a vital role in meeting China's 2020 emission reduction targets by providing reference for determining carbon tax and carbon trading pricing. However, most existing researches only used one method to discuss regional and industrial marginal abatement costs, and almost no studies predicted future marginal abatement costs from the perspective of CO₂ emission efficiency. To make up for the gaps, this paper first estimates marginal abatement costs of CO₂ in three major industries of 30 provinces in China from 2005 to 2015 based on three assumptions. Second, based on the principle of fairness and efficiency, China's 2020 emission reduction targets are decomposed by province. Based on the ZSG-C-DDF model, the marginal abatement costs of CO₂ in all provinces in China in 2020 are estimated and compared with the marginal abatement costs of 2005 to 2015. The results show that (1) from 2005 to 2015, marginal abatement costs of CO₂ in all provinces show a fluctuating upward trend; (2) compared with the marginal abatement costs of primary industry or tertiary industry, most provinces have lower marginal abatement costs for secondary industry; and (3) the average marginal abatement costs of CO₂ for China in 2020 are 2766.882 Yuan/tonne for the 40% carbon intensity reduction target and 3334.836 Yuan/tonne for the 45% target, showing that the higher the emission reduction target, the higher the marginal abatement costs of CO₂. (4) Overall, the average marginal abatement costs of CO₂ in China by 2020 are higher than those in 2005-2015. The empirical analysis in this paper can provide multiple references for environmental policy makers.

Keywords: CO2; China; Emission reduction targets; Marginal abatement cost.