Shadow Price Estimation of CO 2 in China's Regional Iron and Steel Industry

Conserving energy and reducing emissions has become an urgent task to fight against the global climate change. Carbon trading scheme is one of the methods to cope with the carbon emissions and therefore it is essential to estimate the shadow price of CO2. China's iron and steel industry is one of the primary entities that emits CO2 so that in this paper we measured the shadow prices of CO2 in China's provincial iron and steel industry based on the quadratic output directional distance function. The results show that the average CO2 shadow price of China's iron and steel industry from 2006 to 2012 increased from 1,981.76 to 4,227.89 Yuan per ton and it is rather distinct among the three China's typical regions. Therefore, the government should encourage CO2 emission trading to redistribute the CO2 emission reduction tasks.