Using performance indicators to reduce cost uncertainty of Chinaʹs CO2 mitigation goals

Goals on absolute emissions and intensity play key roles in CO2 mitigation. However, like cap-and-trade policies with price uncertainty, they suffer from significant uncertainty in abatement costs. This article examines whether an indicator could be established to complement CO2 mitigation goals and help reduce cost uncertainty with a particular focus on China. Performance indicators on CO2 emissions per unit of energy consumption could satisfy three criteria: compared with the mitigation goals, (i) they are more closely associated with active mitigation efforts and (ii) their baselines have more stable projections from historical trajectories. (iii) Their abatement costs are generally higher than other mitigation methods, particularly energy efficiency and conservation. Performance indicators could be used in the following way: if a CO2 goal on absolute emissions or intensity is attained, the performance indicator should still reach a lower threshold as a cost floor. If the goal cannot be attained, an upper performance threshold should be achieved as a cost ceiling. The narrower cost uncertainty may encourage wider and greater mitigation efforts.