Factors influencing companies' willingness to pay for carbon emissions: Emission trading schemes in China

Abstract

This paper studies the effect of carbon emission trading schemes in China and identifies the factors that influence companies' willingness to pay for carbon emissions, as expressed by the increase in energy costs due to the national carbon market. A questionnaire with a multiple-bounded discrete choice format was designed and 555 valid samples were gathered in this analysis. On average, companies are willing to pay 8.3% more on energy costs, while those participating in pilot trading schemes are willing to pay 10.2% more. Pilot companies also have higher investment in energy-saving technology, better awareness of both carbon mitigation technology and carbon policy, and clearer expectations of the national carbon market. The regression analysis shows that the willingness to pay (WTP) is influenced by several factors. The perception of the high pressure of energy costs will significantly decrease the WTP of the non-pilot companies. If a pilot company presumes that it will participate in the national trading schemes sooner, its willingness to pay will be higher. Participation or not in pilot trading schemes exerts an effect on companies' WTP because of two factors: awareness of carbon mitigation technology and the reduction ratio expected by the companies. Among all manufacturing sectors, companies involved in the non-ferrous, chemical, paper-making and iron and steel sectors can be brought into the national carbon market as priority participants, because they have a higher WTP for carbon emissions, or they have a shorter time expectation for participating in the national carbon market.