Carbon abatement costs and digital revolution: An empirical analysis of manufacturing industry

Abstract

This study examines China’s carbon abatement costs and the role of digital technology, using provincial panel data from 2000 to 2021. By distinguishing between clean and non-clean energy inputs, we find that the estimated carbon abatement cost significantly exceeds prevailing market trading prices and follows a U-shaped temporal pattern—declining initially and then rising steadily. Our analysis shows that digital technology positively influences carbon abatement costs, primarily through improvements in energy efficiency. This effect varies regionally, with the strongest impacts observed in Central China—an unexpected finding given the conventional emphasis on coastal regions. These insights have important policy implications: (1) carbon pricing mechanisms should be reformed to more accurately reflect the true social cost of emissions; (2) the adoption of clean energy must be accelerated to reduce disparities in abatement costs; and (3) targeted digital investments, particularly in inland provinces, can enhance the effectiveness of emissions reduction strategies. By integrating energy-source differentiation with the dynamics of digital transformation, this study offers a more refined framework for evaluating carbon abatement costs and highlights the need for regionally tailored policies to achieve China’s 2060 carbon neutrality goal.