A critical review of distance function based economic research on China’s marginal abatement cost of carbon dioxide emissions

Ma, Chunbo; Hailu, Atakelty; You, Chaoying

doi:10.1016/j.eneco.2019.104533

Cited by 45 publications

(20 citation statements)

References 62 publications

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“…Under most circumstances, the ceilings and floors are reached with two absolute reduction policies, (0, 1, −1) and (−1, 1, −1), respectively. However, for Ningxia, Shandong and Jiangsu, relative reduction policy (−1, 1, 0) results in the highest values of local MAC, indicating that the arbitrariness of direction choice might have big impacts on the estimated shadow price and implied cost-effectiveness of agricultural GHG reduction (Vardanyan and Noh, 2006; Ma et al. , 2019).…”

Section: Resultsmentioning

confidence: 99%

“…Using multiple directions could induce an increase in the efficiency of MAC estimation (Wang et al. , 2017, 2019; Ma et al. , 2019) and reflect diverse reduction policies, implying the robustness in political and social concerns on the nexus between growth and environment (Beltrán-Esteve and Picazo-Tadeo, 2017; Tang et al.…”

Section: Methodsmentioning

confidence: 99%

“…This form is flexible and has the advantage of globally imposing the translation property (Färe et al. , 2010, 2017; Ma et al. , 2019).…”

Section: Methodsmentioning

confidence: 99%

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The cost-effectiveness of agricultural greenhouse gas reduction under diverse carbon policies in China

Tang

Ma²

2022

CAER

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PurposeMitigating agricultural greenhouse gas (GHG) emissions is an essential part of China's effort to achieve net-zero emissions. This study assesses the cost-effectiveness of China's agricultural GHG reduction under diverse carbon policies.Design/methodology/approachThe study employs a parametric non-radial distance function approach and estimates the technical abatement potential and marginal abatement cost (MAC) of GHG in China's agricultural sector for the 2008–2017 period.FindingsAgriculture is expected to make a great contribution to China's net-zero emissions progress. This study empirically analyses the cost-effectiveness of China's agricultural GHG reduction under diverse carbon policies. A parametric non-radial distance function approach is used to derive technical abatement potential and MAC of GHG for the 2008–2017 period. The results indicate that no significant improvement had been achieved in terms of agricultural GHG reduction in China during 2008–2017. The country's agricultural sector could reduce 20–40% GHG emissions with a mean value of 31%. In general, western provinces have larger reduction potential than eastern ones. The average MAC for the whole country is 4,656 yuan/ton CO2e during 2008–2017. For most western provinces, their MAC values are considerably higher than those for most eastern provinces. Compared with previous sectoral estimates of GHG mitigation cost, this study’s estimates indicate that reducing agricultural GHG emissions in some provinces is likely to be cost-effective. The Chinese government should consider expanding its national carbon market to cover agricultural sector.Practical implicationsThe Chinese government should consider expanding its national carbon market to cover agricultural sector.Originality/valueExisting studies in the field mostly ignore input constraints, which is inconsistent with carbon mitigation policy practice, especially in the agricultural sector. This study’s approach integrates both input and output constraints reflecting differing policy practice.

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Section: Resultsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

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The cost-effectiveness of agricultural greenhouse gas reduction under diverse carbon policies in China

Tang

Ma²

2022

CAER

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“…However, the former depends on reliable cost information which is usually confidential and unavailable; the latter one is subject to the issue of projecting the observations to the production frontier by increasing good and bad outputs proportionally. A third option is to apply the directional output distance function approach proposed by Chung et al [8], which has been adopted for estimating marginal abatement costs of pollution emissions in many countries and industries, including Färe et al [9], Lee and Zhou [10] for the U.S., Murty et al [11] for India, Park and Lim [12] for Korea, Matsushita and Yamane [13] for Japan, Wei et al [14], Ma et al [15,16] for China, etc. We apply this approach to estimate the opportunity cost arising from environmental regulations as it is much more flexible and allows us to estimate the distance to the production frontier by increasing good outputs and reducing bad outputs simultaneously.…”

Section: Introductionmentioning

confidence: 99%

Opportunity Cost of Environmental Regulation in China’s Industrial Sector

Wang

Lin

2021

IJERPH

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In this paper, we employ a directional distance function to estimate the opportunity cost arising from environmental regulations in China’s industrial sector. The change of opportunity cost is decomposed mathematically into two components including technical change and input change. Our results show that the opportunity cost attributed to environmental regulation is nil in some regions. The change of opportunity cost is marginal at the national level, as the positive effect of technical change is canceled out by the negative impact of input change on opportunity cost. Built on our mathematical decomposition, we further estimate the effects of environmental regulations on opportunity cost using a mediation model. It shows that environmental regulation has a significantly positive direct effect and a significantly negative indirect effect through foreign direct investment on opportunity cost. Our findings suggest, firstly, that inward FDI in China’s industrial sector represents relatively dirty production technology; and, secondly, industrial production has transited towards a less carbon-intensive input mix. This paper, therefore, provides new insights for the recent dynamics of carbon abatement performance of China’s industrial sector with policy implications.

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“…Although expert-based evaluations are easy to understand, they have not been widely applied, due to a lack of objectivity. Secondly, MAC is also able to be calculated via a distance function, to estimate past and present values based on historical data (Ma et al 2019). For example, this approach was used by Hailu and Ma (2017), Ma and Hailu (2016), Wang et al (2017), and Wu et al (2019).…”

Section: Introductionmentioning

confidence: 99%

Carbon price prediction under output uncertainty

Liu

Song

2021

Environ Sci Pollut Res

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Output growth uncertainty is a key issue in climate economics, involving the full range of impacts from emissions, through temperature changes to economic damage. The current study introduces output growth uncertainty into the EZ climate model, in which the predicted global carbon emissions under output growth uncertainty are used as weighted input. The objective of the present study is to calculate the future carbon prices represented by marginal abatement cost (MAC), to maximize social welfare. Moreover, the sensitivity of the two output growth uncertainty parameters, namely population growth rate and per capita output growth rate, is analyzed. Lastly, the significance and influence of output uncertainty for carbon price are also discussed. The results exhibit that (1) the optimal prices of per ton CO 2 e emission permits in the

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A critical review of distance function based economic research on China’s marginal abatement cost of carbon dioxide emissions

Cited by 45 publications

References 62 publications

The cost-effectiveness of agricultural greenhouse gas reduction under diverse carbon policies in China

The cost-effectiveness of agricultural greenhouse gas reduction under diverse carbon policies in China

Opportunity Cost of Environmental Regulation in China’s Industrial Sector

Carbon price prediction under output uncertainty

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