Estimating the the regional total factor efficiency and pollutants' marginal abatement costs in China: A parametric approach

Applying a parameterized directional distance function approach, this paper estimates the regional total factor efficiency and pollutants' marginal abatement costs (MACS) in China covering the years 2003-2012. We find that if all provinces produced on the production frontier, China could potentially conserve energy consumption by 29.5%, and reduce emissions of carbon dioxide (CO2) and sulfur dioxide (SO2) by 28.2% and 27.4%, respectively: The provinces in southeast coastal area performed better than the rest of the country. The bulk of potentials for energy saving and pollution reduction appeared in middle Yellow River, northwest, north coast, and northeast areas. The MAC of CO2 increased steadily and continuously, while that of SO2 showed a sharp increase throughout the whole study period. The average MACS of CO2 and SO2 for the whole country were 5512 Yuan/tonne and 154,395 Yuan/tonne, respectively. The MACS of SO2 in different areas were remarkably unbalanced. Our estimates suggest that the opportunities for double dividend of economic production and pollution reduction are potentially achievable. Policymakers are required to facilitate technology transfer and encourage scientific and technological cooperation between inter-Aand intra-area. Additionally, they should also consider the regional heterogeneity when making the reduction allocations within the economic sectors and make the market prices of pollutants flexible. (C) 2016 Elsevier Ltd. All rights reserved.