China's regional industrial energy efficiency and carbon emissions abatement costs

Evaluating the energy and emissions efficiency, measuring the energy saving and emissions reduction potential, and estimating the carbon price in China at the regional level are considered a crucial way to identify the regional efficiency levels and efficiency promotion potentials, as well as to explore the marginal abatement costs of carbon emissions in China. This study applies a newly developed Data Envelopment Analysis (DEA) based method to evaluate the regional energy and emissions efficiencies and the energy saving and emissions reduction potentials of the industrial sector of 30 Chinese major cities during 2006-2010. In addition, the CO₂ shadow prices, i.e., the marginal abatement costs of CO₂ emissions from industrial sector of these cities are estimated during the same period. The main findings are: (i) The coast area cities have the highest total factor industrial energy and emissions efficiency, but efficiency of the west area cities are lowest, and there is statistically significant efficiency difference between these cities. (ii) Economically well-developed cities evidence higher efficiency, and there is still obviously unbalanced and inequitable growth in the nationwide industrial development of China. (iii) Fortunately, the energy utilization and CO₂ emissions efficiency gaps among different Chinese cities were decreasing since 2006, and the problem of inequitable nationwide development has started to mitigate. (iv) The Chinese major cities could have, on average, an approximately 19% or 17% efficiency increase on energy utilization or CO₂ emissions during 2006-2010. (v) Promoting the industrial energy utilization efficiency is comparatively more crucial for Chinese cities at the current stage, and the efficiency promotion burdens on the west area cities are the heaviest among all Chinese cities. (vi) An N-shaped Environmental Kuznets Curve (EKC) exists between the level of industrial CO₂ emissions efficiency and income, and the inflection point the EKC is located between 12,052 and 12,341 US$ of GDP per capita, indicating that an accelerated CO₂ emissions efficiency increase will accrue when this income level is reached. (vii) In 2010, the industrial total energy saving and CO₂ emissions reduction potentials for Chinese major cities were 41 million tce and 143 million tCO₂, respectively. (viii) The average industrial CO₂ emissions abatement cost for Chinese major cities is 45 US$ during 2006-2010, and the existence of large gap on CO₂ shadow prices between different Chinese regions provide a necessity and possibility for establishing a regional carbon emissions trading system in China.