Are Chinese provincial carbon emissions allowances misallocated over 2000–2017? Evidence from an extended Gini-coefficient approach

Abstract

Carbon emission allowances (CEAs) are critical to regional economic growth against the background of tackling global climate change, and CEA misallocation may be detrimental to productivity and carbon emission performance. However, whether Chinese provincial CEAs are misallocated over the past decades has not yet been thoroughly investigated. For this purpose, this study first defines CEA misallocation based on the concept of provincial CEA marginal outputs; then we develop a distortion index to measure CEA misallocation by extending the conventional Gini coefficient method. Finally, an empirical analysis of Chinese provincial CEA misallocation throughout 2000–2017 is presented. The results indicate the existence of Chinese provincial CEA misallocation, as the distortion index increases from 0.229 to 0.279 over 2000–2017, implying that Chinese provincial CEA misallocation is aggravated. At the regional level, we find that the CEA misallocation of the western area is relatively the most serious, while that of the central area is not obvious. The CEA misallocation in the western area aggravates the CEA misallocation of the entire nation. We further discuss how to alleviate CEA misallocation by investigating the distortion index in different carbon emission reduction scenarios. We find that the distortion index of 2017 can be reduced to 0.272 compared with 0.279 in the actual scenario if the provinces with CEA marginal outputs lower than the national level reduce their emissions by 3%. The results indicate that controlling the emissions of the provinces with lower CEA marginal outputs may be an effective way to alleviate CEA misallocation.