Marginal abatement costs of CO₂ emissions in the thermal power sector: A regional empirical analysis from China

Quantifying marginal abatement costs of CO₂ emissions are beneficial to estimate mitigation potentials and costs of China's regional thermal power sector. Based on the panel data of 30 provinces from 2004 to 2013, this study estimates the technical efficiency, reduction potential, and marginal abatement costs of CO₂ emissions from the thermal power sector in China using a parametric quadratic directional output distance function. A regression analysis is undertaken to identify the factors that drive marginal abatement costs. The main results are: (1)The mean value of directional output distance function in China's thermal power sector is 0.0449, indicating that inefficient production of Chinese thermal power sector accounts for 4.49%. CO₂ emissions could be mitigated by accumulated 1.22 billion ton in the past ten year, which is approximate 4.49% of total CO₂ emissions; (2)The national weighted average marginal abatement costs of CO₂ emissions are 316.51 Yuan/ton which is far higher than carbon price in the current ETS (emission trading system) pilots in China, implying that carbon price does not inflect supply and demand of carbon allowance; (3)The regression results show that the marginal abatement costs positively connect with regional power scale, namely a 1% increase in power scale will result in a 13.8% increase. Technology level, coal supply and power structure are negatively correlated with marginal abatement costs, namely a 1% increase in technology level, coal supply and power structure will result respectively in a 30.41%, 4.38% and 77.7% decrease.