Marginal Abatement Cost of Carbon Emissions under Different Shared Socioeconomic Pathways

Future emissions scenarios have served as a primary basis for assessing climate change and formulating climate policies. To explore the impact of uncertainty in future emissions scenarios on major outcomes related to climate change, this study examines the marginal abatement cost (MAC) of carbon emissions under the latest Shared Socioeconomic Pathways (SSPs) subject to the economic optimum and the 1.5 °C temperature increase constraint using the Epstein-Zin (EZ) climate model. Taking the ”Regional Rivalry” (SSP3) scenario narrative under the economic optimum as a representative case, the expected MACs per ton CO2 equivalent (CO2e) emissions in the years 2015, 2030, 2060, 2100, and 2200 are: $102.08, $84.42, $61.19, $10.71, and $0.12, respectively. In parallel, the associated expected average mitigation rates (AMRs) are 0%, 63%, 66%, 81%, and 96%, respectively. In summary, in a world developing towards regional rivalry (SSP3) or fossil-fueled development (SSP5) with high mitigation pressure, the MAC values have approximately doubled, compared with the sustainability (SSP1) and inequality (SSP4) storylines with low mitigation pressure levels. The SSP2 (Middle of the Road) shows a moderate MAC decreasing trend with moderate mitigation pressure. The results provide a carbon price benchmark for policy makers with different attitudes towards the unknown future and can be used to formulate carbon mitigation strategy to respond to specific climate goals.

Price Discovery of Consignment Auctions for Emission Permits

A consignment auction aims to increase political feasibility by reducing the financial burden of initial permits allocation and to do the role of price discovery. However, previous analytical models presented contradictory results for the price discovery function of a consignment auction. Thus, this study reexamines whether a consignment auction can perform its price discovery function. The study uses a simple game model with several assumptions differentiated from previous analytical models: explicit consideration of the secondary market and firms as price-takers with various behaviors to respond to uncertainty about the price in the secondary market. Firms are classified into three types: speculators who seek arbitrage, doctrinarians who determine a permit demand based on an estimation of their marginal abatement cost, and neutralists who keep a permit demand the same as initial emission endowments. The results reveal that when a consignment auction was introduced, the expected equilibrium price was identical to that of the secondary market price, demonstrating that the auction could deliver the price discovery function. This is because speculators and doctrinarians provide information about their price expectations and marginal abatement cost through their estimated demand functions. Additionally, the smaller number of neutralists is, and the higher the risk-seeking propensity of speculators is, the more effective the price discovery function is.

Robust Estimation of Marginal Abatement Cost of Water Pollutant: Evidence from Yangtze River Basin

Based on the econometric method of bootstrap for 1000 times, this study estimated the marginal abatement cost of water pollutant, COD and NH3-N, for 9 provinces and 2 municipalities in the Yangtze River Basin from 2001 to 2017 by building a robust estimation model. We found that the marginal abatement cost increases at an average annual rate of 19.47%. The marginal abatement cost in Jiangsu and Sichuan are significantly higher than other regions. Differences in marginal abatement cost make it possible to trade emission rights between regions.