Regional eco-efficiency and pollutants' marginal abatement costs in China: A parametric approach

Applying a parameterized directional distance function approach, this paper estimates the regional eco-efficiency and pollutants' marginal abatement costs in China based on provincial panel data covering the years 2003–2012. We find that China could potentially save capital, labor, land, energy and water by 18.07%, 11.47%, 11.20%, 12.28% and 11.19%, and reduce emissions of carbon dioxide (CO₂), household refuse and waste water by 11.75%, 11.02% and 11.46%, respectively, on condition that all provinces produced fully efficiently, The south and east coastal areas were the most eco-efficient, while the middle Yangtze River and southwest areas performed relatively poor. For the whole country, the average shadow prices of CO₂, household refuse and waste water were 717.27 Yuan/tonne, 42,936.98 Yuan/tonne and 306.65 Yuan/tonne, respectively. The shadow price of CO₂ revealed significant regional disparities and that of household refuse showed a rapid increase throughout the study period. Our estimates suggest that policymakers should take measures to avoid ineffective capital investment and improve economic output efficiency in inland provinces, especially in the middle Yangtze River, northwest and southwest areas, and facilitate technological cooperation between developed and undeveloped areas. The regional heterogeneity and flexible price mechanism of various pollutants should be taken into consideration when making the reduction allocations among different areas.