Assessment of impacts of Hubei Pilot emission trading schemes in China – A CGE-analysis using TermCO2 model

Abstract

Among the seven Pilot Emission Trading Schemes (ETS) in China, the ETS in Hubei province exerts significant influences. And Hubei’s economic and social contexts are very similar to China as a whole. By applying a Chinese multi-regional general equilibrium model (TermCO2), this paper simulates the economic and environmental impacts of the Hubei Pilot ETS, under a scenario based on the institutional factors of this Pilot ETS and careful consideration is given to ETS coverage. The results show that the Hubei Pilot ETS has significantly reduced carbon emission while its adverse impact on economy is relatively negligible. The carbon emission of Hubei in 2014 is reduced by 1.00% (6.98 million tons) at an average carbon price of 34.31 Yuan per ton. However, the provincial GDP only declines slightly by 0.06% (1.48 billion Yuan) and the average GDP loss is 212.09 Yuan per ton. Meanwhile, Hubei’s economic structure has been adjusted, and the provincial employment and investment rate decreases by 0.09% and 0.33% respectively. However, due to income distribution effect caused by free allowances, the provincial household consumption increases by 0.35% and the consumer price index (CPI) increases slightly by about 0.02%.