China's manufacturing firms' willingness to pay for carbon abatement: A cost perspective

An, Y; Shi, X; Wang, Q; Yu, J; Zhou, D; Zhou, X

China's manufacturing firms' willingness to pay for carbon abatement: A cost perspective

An, Y Shi, X

Wang, Q Yu, J Zhou, D Zhou, X

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Publisher:: WILEY
Publication Type:: Journal Article
Citation:: Business Strategy and the Environment, 2023, 32, (8), pp. 5477-5486
Issue Date:: 2023-12-01

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Field	Value	Language
dc.contributor.author	An, Y
dc.contributor.author	Shi, X https://orcid.org/0000-0001-9653-7395
dc.contributor.author	Wang, Q
dc.contributor.author	Yu, J
dc.contributor.author	Zhou, D
dc.contributor.author	Zhou, X
dc.date.accessioned	2024-01-30T21:41:59Z
dc.date.available	2024-01-30T21:41:59Z
dc.date.issued	2023-12-01
dc.identifier.citation	Business Strategy and the Environment, 2023, 32, (8), pp. 5477-5486
dc.identifier.issn	0964-4733
dc.identifier.issn	1099-0836
dc.identifier.uri	http://hdl.handle.net/10453/175104
dc.description.abstract	The existing studies of emissions reduction focus mainly on the technical potential and abatement costs while overlooking firms' willingness to pay (WTP) for emissions reduction. Yet WTP is a key parameter in a firm's decision to carry out emissions reduction while maximizing its profits. This paper estimates China's manufacturing industry (CMI) firms' maximum WTP for carbon abatement—defined as the cumulative product between the marginal abatement cost and corresponding abatement potential—using a large sample from a data envelopment analysis model. The results show that (a) the maximum WTP is significantly constrained by an isocost carbon abatement curve at RMB 8.65 million for the representative CMI firm; (b) the representative firms' WTP for carbon abatement varies among the sub-sectors; and (c) profitability and production scales both positively affect firms' WTP for carbon abatement in all of CMI sub-sectors, while innovation investment has a negative effect. The results suggest that the cost of carbon reduction technology for CMI firms should be below RMB 8.65 million for a representative CMI firm. The government should formulate subsidies or tax relief policies to help firms reduce their abatement costs. Further, the division of tasks in different sub-sectors, between carbon emissions reduction on the one hand, and ongoing innovation on the other, should be clearly distinguished by policy bias to promote the transformation of industrial structure.
dc.language	English
dc.publisher	WILEY
dc.relation.ispartof	Business Strategy and the Environment
dc.relation.isbasedon	10.1002/bse.3431
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	0502 Environmental Science and Management, 1501 Accounting, Auditing and Accountability, 1503 Business and Management
dc.subject.classification	Business & Management
dc.subject.classification	3501 Accounting, auditing and accountability
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	3507 Strategy, management and organisational behaviour
dc.title	China's manufacturing firms' willingness to pay for carbon abatement: A cost perspective
dc.type	Journal Article
utslib.citation.volume	32
utslib.for	0502 Environmental Science and Management
utslib.for	1501 Accounting, Auditing and Accountability
utslib.for	1503 Business and Management
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/DVC (International)
pubs.organisational-group	University of Technology Sydney/DVC (International)/Australia-China Relations Institute
utslib.copyright.status	open_access	*
dc.date.updated	2024-01-30T21:41:59Z
pubs.issue	8
pubs.publication-status	Published
pubs.volume	32
utslib.citation.issue	8

Abstract:

The existing studies of emissions reduction focus mainly on the technical potential and abatement costs while overlooking firms' willingness to pay (WTP) for emissions reduction. Yet WTP is a key parameter in a firm's decision to carry out emissions reduction while maximizing its profits. This paper estimates China's manufacturing industry (CMI) firms' maximum WTP for carbon abatement—defined as the cumulative product between the marginal abatement cost and corresponding abatement potential—using a large sample from a data envelopment analysis model. The results show that (a) the maximum WTP is significantly constrained by an isocost carbon abatement curve at RMB 8.65 million for the representative CMI firm; (b) the representative firms' WTP for carbon abatement varies among the sub-sectors; and (c) profitability and production scales both positively affect firms' WTP for carbon abatement in all of CMI sub-sectors, while innovation investment has a negative effect. The results suggest that the cost of carbon reduction technology for CMI firms should be below RMB 8.65 million for a representative CMI firm. The government should formulate subsidies or tax relief policies to help firms reduce their abatement costs. Further, the division of tasks in different sub-sectors, between carbon emissions reduction on the one hand, and ongoing innovation on the other, should be clearly distinguished by policy bias to promote the transformation of industrial structure.

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http://hdl.handle.net/10453/175104