Forecasting the Allocative Efficiency of Carbon Emission Allowance Financial Assets in China at the Provincial Level in 2020

Shihong Zeng,Yan Xu,Liming Wang,Qirong Li,Jiuying Chen

doi:10.3390/en9050329

Abstract

As the result of climate change and deteriorating global environmental quality, nations are under pressure to reduce their emissions of greenhouse gases per unit of GDP. China has announced that it is aiming not only to reduce carbon emission per unit of GDP, but also to consume increased amounts of non-fossil energy. The carbon emission allowance is a new type of financial asset in each Chinese province and city that also affects individual firms. This paper attempts to examine the allocative efficiency of carbon emission reduction and non-fossil energy consumption by employing a zero sum gains data envelopment analysis (ZSG-DEA) model, given the premise of fixed CO2 emissions as well as non-fossil energy consumption. In making its forecasts, the paper optimizes allocative efficiency in 2020 using 2010 economic and carbon emission data from 30 provinces and cities across China as its baseline. An efficient allocation scheme is achieved for all the provinces and cities using the ZSG-DEA model through five iterative calculations.

Highlights

The carbon emission allowance is a new type of financial asset
The initial efficiency values for five provinces and cities reach 1, which demonstrates that the allocation for these five provinces and cities is data envelopment analysis (DEA) effective but that the other
Using the adjusted emission amount as the input variable and making another estimation of the efficiency values of the original DEA model, we find that the original DEA efficiency values increase significantly

Summary

Introduction

The carbon emission allowance is a new type of financial asset. This article addresses the new type of financial asset allocative efficiency in each Chinese province and city, which we define as the mix of carbon emission reductions and increases across provinces and cities that must be calculated to achieve reach efficient frontiers. China is facing critical problems that must be solved, and studies of carbon emission resulting from energy consumption focus on questions involving how to achieve reasonable emission reductions while balancing the relationship between economic development and environmental concerns. China’s government has committed to reducing its carbon emission per unit of GDP by 40%–50% during the 2005–2020 period. During this same period, non-fossil energy consumption is targeted to account for 15% of total primary energy consumption

Methods

Results

Conclusion