Carbon quota allocation at the provincial level in China under principles of equity and efficiency

Abstract

Allocating emission quotas among provinces fairly and efficiently is a critical issue for China. We developed a carbon quota allocation framework at the provincial level considering both the equity and efficiency principles based on a multi-objective non-linear programming model. We established a carbon Gini coefficient and an emission abatement cost function to measure the equity and efficiency of quota allocation, respectively. We then introduced them as objectives into a multi-objective non-linear programming model and obtained the optimal emission quota allocation for 30 provinces in China, by realizing the trade-off between the equity and efficiency principles. Our analysis revealed that Chinese carbon emissions have not yet peaked and that the proportion of carbon emission in each province is similar. Moreover, provinces with higher GDP per capita, carbon intensity, and historical accumulated carbon emissions should shoulder more burden of carbon intensity reduction and higher marginal reduction costs. The rationality analysis indicates that our method outperforms traditional methods according to the principles of both equity and efficiency. We conclude by offering policy recommendations for the establishment of a national unified carbon market.