Chapter 2 estimates the interprovincial CO 2 shadow price in China based on a parametric model. The general environmental directional distance function method is used to estimate the potential price of carbon dioxide, thereby obtaining the economic cost of unit carbon emission reduction. Due to the imbalance of economic development level in various regions of China, the environmental cost for economic growth is not the same. Therefore, the estimation of CO 2 shadow price for each province in China will help full understanding of China’s actual situation. The results mainly show that for provinces with strong economic strength, the average shadow price of CO 2 is higher than that of economically underdeveloped areas.