CO2 Emission Performance, Mitigation Potential, and Marginal Abatement Cost of Industries Covered in China’s Nationwide Emission Trading Scheme: A Meta-Frontier Analysis

Abstract

China's nationwide emission trading scheme (CN-ETS) is scheduled to be launched in 2017. It is of great urgency and necessity to obtain a good understanding of the participating sectors of CN-ETS in terms of energy utilization and CO 2 emissions. In this regard, it should be noted that the findings may be biased without taking industry heterogeneity into consideration. To this end, a meta-frontier framework with the directional distance function is employed to estimate the CO 2 emission performance (CEP), mitigation potential (MP), and marginal abatement cost (MAC) at sector levels under the meta-frontier and the group-frontier. The results indicate that significant disparities in the CEP, MP, and MAC exist under both frontiers among various sectors, and the sectoral distributions of CEP, MP, and MAC are found to be different between the two frontiers. Additionally, the differences between the two frontiers in terms of CEP, MP, and MAC are considerable, and exhibit unequal distributions among these sectors. Notably, MAC under both frontiers and the difference between them are found to be significantly correlated with the carbon intensity. Finally, policy implications are provided for the government and participating enterprises, respectively.In the context of achieving the construction and operation of CN-ETS, it is of great urgency and necessity to obtain a good understanding of the participating sectors in terms of energy utilization and CO 2 emissions [7]. In this regard, estimating the CO 2 emission performance (CEP), mitigation potential (MP), and marginal abatement costs (MAC) for these sectors can provide valuable information for the governments and participating enterprises. From the perspective of the government, a good knowledge of CEP, MP, and MAC could help design appropriate market mechanisms for the CN-ETS, e.g., the estimated MAC may be used as a reference for carbon pricing [8,9]. On the other hand, a comprehensive acquaintance of MAC among the participating sectors could help the participating enterprises to determine the best mitigation strategies [10]. Moreover, to the best knowledge of the authors, there have been few studies on the CEP, MP, and MAC of the sectors covered in the CN-ETS, and this paper aims to fill this research gap.Additionally, it is accepted that there exists significant heterogeneity in terms of the production technology among various sectors [11], which is regarded as an obstacle to the objective evaluation of CEP, MP, and MAC [12]. Therefore, taking the technology heterogeneity into consideration, we employ a joint framework consisting of the directional distance function (DDF) and meta-frontier analysis to estimate CEP, MP, and MAC under the meta-frontier and the group-frontier, respectively. Following this, we investigate the sectoral distributions of CEP, MP, and MAC under both frontiers, and analyze the differences between the two frontiers at sector levels. Finally, several policy recommendations for the CN-ETS are made based on the conclusions. The rest of the paper...

Potential Benefit of Carbon Benchmarking: Analysis of Semiconductor Industry in Taiwan

“…All of these methods seek to measure the impact of undesirable outputs on TE. Of the three approaches, the directional distance function approach has emerged in recent years as the main method for measuring TE with undesirable outputs included, because it avoids the technical problems outlined above [13][14][15][16][17][18][19][20][21][22][23]. However, to correct the possible potential estimated bias of TE under the directional distance function, a bootstrap algorithm was proposed by Simar et al [24].…”