Understanding Marginal Abatement Cost Curves in Energy-intensive Industries in China: Insights from Comparison of Different models

The Kyoto Protocol inspires the idea of establishing emissions trading scheme, regarding economic-effectiveness as a significant factor to achieve reduction targets and meet obligation. With this trend, marginal abatement cost curves (MACCs) have been used in climate policy analysis under general equilibrium framework, and have been proved a valid device to highlight the superiority of ETS. This paper focuses on the comparison of MACCs at industry level in China, derived by us from CGE, GCAM and TIMES respectively. It's clear that there is no dynamic adjustment process in these models, so we use linear interpolation method to introduce carbon tax to simulate actual situation. Meanwhile, we also take data from potential and cost study into account. To make our work more targeted, we pay close attention to energy-intensive industries with high carbon emissions level such as electricity, cement and steel, which are most likely to be covered in carbon market. The results indicate how MACCs change and illustrate why they change, depending on applied methodology and underlying assumptions. As we ignore the indirect effects, for instance, tax distortions and non-financial costs during above simulation, the emissions abatement cost we achieve by using integral calculus won’t be equivalent to real cost. Therefore, it's a wise decision for government department and research institute to be cautious when using MACCs as basis of policy making and academic studies.