Operational efficiency evaluation and system design improvements for carbon emissions trading pilots in China

Abstract

ABSTRACTEvaluating the operational efficiency of emissions trading pilots has become a crucial task faced by China's emissions trading scheme in its stable transition from pilot programs in limited areas to a nationwide carbon trading market. A number of factors contribute to the difficulty of such evaluations, such as differences in system design, the absence of evaluation systems and the complexity of external factors. A study of the seven major carbon emissions trading pilots in China was conducted. In this paper, the institutional arrangements of carbon emissions trading pilots are differentiated based on six dimensions: distribution systems, flexible mechanisms, emissions control scope, transaction rules, reporting and verification systems, and legal systems. In addition, an evaluation index system is constructed to determine the input and output efficiency of the carbon emissions trading market. The Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) method is used to calculate regional difference coefficients, revise the output index data, and effectively control the influence of the non-equilibrium external environment on efficiency. A Super Slack Based Model (Super-SBM) model is used to measure the operational efficiency of the carbon emissions trading market in the pilot area, and the results indicate that (1) for countries and regions with external environments facing uneven development, a differentiated system design should be developed; (2) the lack of changes in the overall ordering of the pilot efficiency demonstrates that institutional arrangements play a decisive role in the operational efficiency of China's carbon emissions trading market; and (3) none of the seven carbon emissions trading pilots has been operating effectively in China. The results indicate that a series of measures should be formulated, including the introduction of mechanisms for increasing quotas; increasing the flexibility of offsetting mechanisms; lowering the market access threshold; expanding the coverage of emissions control; training and restoring the professional monitoring reporting verification (MRV) ability; strengthening efforts associated within incentives and sanctions; and enhancing the legal enforcement of relevant policies.