Estimation of CO 2 shadow price in Chinese provinces: an output distance function approach

As the low-carbon issue become increasingly critical in the world. The marginal abatement cost (shadow price) of CO ₂ emission is a determinant in the carbon emissions trading market. This paper estimates the CO ₂ shadow price of different Chinese provinces based on the parametric approach: the output distance function. The results show that the average CO ₂ marginal abatement cost is 1.8 Y/T (0.28 $/T), much lower than the world carbon market price. If a regional carbon Emission Trading Scheme (ETS) is introduced in China, the market price of CO ₂ emission will be 0~12 Y/T.