Inderscience Publishers

Estimation of CO2 shadow price in Chinese provinces: an output distance function approach

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As the low–carbon issue become increasingly critical in the world. The marginal abatement cost (shadow price) of CO2 emission is a determinant in the carbon emissions trading market. This paper estimates the CO2 shadow price of different Chinese provinces based on the parametric approach: the output distance function. The results show that the average CO2 marginal abatement cost is 1.8 Y/T (0.28 $/T), much lower than the world carbon market price. If a regional carbon Emission Trading Scheme (ETS) is introduced in China, the market price of CO2 emission will be 0∼12 Y/T.

Keywords: ETS, emission trading scheme, shadow price, output distance function, China, marginal abatement cost, CO2, carbon dioxide, carbon emissions, carbon trading

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