Can carbon emission trading contribute the synergistic reduction of carbon and pollution emissions in China？A marginal abatement cost perspective

Abstract

Carbon emission trading policy, as a well-known emissions reduction strategy, can reduce both carbon and pollutant emissions. But it is still unclear whether and how much it can lower the marginal abatement costs of pollutants while reducing the marginal abatement costs of carbon. Studying the carbon emission trading policy’s level of savings on marginal abatement costs and the presence or absence of synergistic effects from a cost viewpoint are crucial in this context. This research evaluates the marginal abatement costs of carbon and pollutants in 30 Chinese provinces from 2000 to 2019. Then, a difference in difference (DID) model is used to evaluate the direct impact of carbon emission trading policy on marginal abatement costs, and its dynamic change properties are examined. The indirect impact of carbon emission trading policy on marginal abatement costs is next examined from the standpoint of abatement space and technological progress, and lastly the overall impact is taken into consideration. The findings indicate that: (i) The measured marginal abatement costs exhibits variations based on time and location. (ii) The carbon emission trading policy has a synergistic impact, lowering both the marginal abatement costs of pollutants and the marginal abatement costs of carbon, especially the former. (iii) The carbon emission trading policy tends to have a steadily diminishing effect on marginal abatement costs over time. (iv) The carbon emission trading policy not only reduce carbon and pollutant emissions, but also indirectly affect marginal abatement costs through technological progress and abatement space, and the indirect effect had a stronger impact on marginal abatement costs of pollutants compared to marginal abatement costs of carbon. Based on the study’s findings, policy proposals are put forth to encourage the cost-based synergy of pollution and carbon emissions reduction.