Convergence analysis of regional marginal abatement cost of carbon dioxide in China based on spatial panel data models.

China has announced to launch a national emission trading system (ETS). The heterogeneity of marginal abatement cost (MAC) is prerequisite for trading, and the knowledge about the evolutionary characteristics of MAC is particularly necessary. However, the ß convergence theory has been proved to be suitable yet rarely applied to the study of MAC of CO2. To fill this gap, this paper connects them creatively, and the convergence of MAC during 2001-2015 and the influential factors are explored by spatial panel data models. Results show that China's MAC converges during the study period whether the spatial effect is considered or not. When evaluating the convergence of MAC, the spatial effect should not be ignored, because it will improve the explanatory power of models and promote the convergence. The size of labor force, emission level, coal consumption, foreign direct investment, and industrial structure significantly affect the growth rate of MAC. Low-carbon policies could be formulated fully considering the factors and their spillover effects. Those findings are certainly significant in imposing carbon reduction targets and adopting policy instruments. In addition, a national ETS is more applicable to China's reality at this stage and suggested to introduce carbon tax in due course in the future.