Allocation of pollutant emission permits at industrial level: Application of a bidirectional-coupling optimization model

Abstract

Abstract Despite the total emission control that has been implemented for decades, China is still confronted with insignificant improvement of environmental quality due to ineffective allocation of pollutant emission permits (PEPs). PEPs allocation at industrial level is critical in promoting industrial restructuring and technological innovation and ensuring effective total emission control. In this study, a bidirectional-coupling optimization model (BCOM) is developed by integrating both forward (focusing on environmental benefits) and backward (focusing on economic benefits) optimization. It is applied to a typical region in China for the allocation of SO2 emission permits among eight key industries in 2020. Under the scheme by BCOM, PEPs for the industries of non-metal and agricultural products will increase 11.6% and 9.2% compared with the 2015 level, which implies that these industries should be encouraged for development. PEPs for the other six industries will all decrease, among which the metal industry has the largest emission reduction rate (34.1%). Emission intensity, growth rate of industrial output and industrial profit rate jointly contribute to differentiated PEPs allocation. The provided interval values of PEPs and industrial output allow flexibility for reshaping the industrial structure. The results of the BCOM are also compared with those of other four alternative allocation methods through comprehensive evaluation to illustrate the robustness of the BCOM with regard to compromising fairness and efficiency and achieving both maximum economic and environmental benefits. The proposed approach and empirical results are expected to offer better decision support to reasonable PEPs allocation and emission reduction at industrial level.