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Abatement potential and shadow price of carbon dioxide emissions from fuel combustion in China’s secondary industry

Zhaoquan Xue, Nan Li, Hailin Mu*, Yuqing Jiang

*Corresponding author:

ABSTRACT: The assessment of carbon dioxide (CO2) emissions performance is crucial to make policies for abatement. This study applies the parameterized quadratic directional output distance function to estimate the technical inefficiency, abatement potential and shadow price of CO2 emissions from fuel combustion in China’s secondary industry during 2001-2015. The CO2 emissions performances in three major regions show significant differences and regional characteristics. The developed eastern region has the highest CO2 emissions and abatement potential but the lowest values in terms of CO2 intensity, technical efficiency and shadow price; the indicators of the developing central region are in the mid-level position; in the undeveloped western region, CO2 emissions reduction via efficiency improvement is limited and abatement will bring huge economic costs. The emissions reduction targets and control policies designed at regional level are rather necessary. The provinces with relatively low shadow price should be assigned with higher CO2 emissions reduction targets, while that with high shadow price should lighten the burden of reduction. Meanwhile, the differentiated shadow prices make it feasible for China to establish a cross-regional unified emissions trading market to further the cooperation between provinces.