Do marginal abatement costs matter for improving air quality? Evidence from China's major cities.

ABSTRACT

This paper performs a two-stage analysis to investigate the trade-off between economic growth and pollution abatement. We first estimate the marginal abatement costs (MACs) of CO2, SO2, NOx, and particulate matter (PM) for 30 major Chinese cities from 2006 to 2015 via the shadow price approach under the directional distance function framework. The results show that the optimal directional vector is (11, -1, -1, -1, -1), which may indicate that increasing economic output is much more important than reducing the above undesirable outputs in these cities. Then, having examined the relationship between MACs and air quality by panel regression and dose-response analyses, we found ranges of positive and statistically significant treatment effects for the MACs of SO2 and PM on their respective concentrations. The overall results suggest that government officials in these cities may give precedence to economic growth over environmental protection.