Power and Carbon Sovereignty in a Non-Traditional Capitalist State: Discourses of Carbon Trading in China

There’s a market growing in the United States, but unlike markets that trade in tangible commodities, this one trades in the absence of something no one wants: greenhouse gases in the atmosphere. Hundreds of companies make it possible for individuals, organizations, businesses, and even events such as rock music festivals to proclaim themselves carbon-neutral by paying someone else to reduce their emissions. Worried about your carbon footprint? No problem. For fees of US$2–50 per ton of “avoided emissions,” an offset provider will funnel your money into an activity or technology that keeps greenhouse gases out of the atmosphere. The question is, are offset buyers really getting what they paid for?

The carbon emission trading scheme (ETS), tradable green certificate (TGC) and green power trading (GPT) policies are vital for promoting energy transformation and carbon reduction under the dual carbon goals. However, the effects of and relationships among multiple policies urgently need to be studied. In this work, the panel data of 30 provinces in China from 2010 to 2023 are used. First, through the multiperiod difference-in-differences (DID) method, fixed effect models and mediating effect models, the carbon reduction effects of the pilot and national ETS policies, the renewable energy development effects of the TGC and GPT policies, and the multipolicy synergy effect are examined. A dual machine learning model is innovatively introduced to test the robustness of the results. Second, the slack-based measure–directional distance function–global Malmquist–Luenberger (SBM–DDF–GML) method is used to calculate the GTFP and investigate its transmission effect on policies. Finally, the impacts of the ETS, TGC and GPT policies on fossil fuel consumption are further analysed. The results indicate the following. (1) The pilot ETS policy reduces carbon emissions and carbon intensity, whereas the national ETS policy increases carbon emissions and carbon intensity in the short term. The TGC and GPT policies increase renewable energy generation and its proportion. (2) The synergy of the pilot ETS and GPT policies is the best for reducing carbon emissions and carbon intensity. The synergy among national ETS, TGC and GPT policies is optimal for developing renewable energy. In addition, there is redundancy between the TGC and GPT policies. (3) The pilot ETS policy inhibits GTFP, whereas the national ETS, TGC and GPT policies promote GTFP. The GTFP significantly reduces carbon emissions and carbon intensity and increases renewable energy generation and its proportion. (4) Both the pilot ETS and national ETS policies reduce the intensity of fossil fuel consumption. The GPT policy reduces the total level of fossil fuel consumption, whereas the TGC policy increases this level. In this work, innovative decarbonisation policies synergy pathways and insights into achieving green and low-carbon transitions in China and other developing countries are provided.

With the decline of the international market under the Clean Development Mechanism, China is establishing a national Emission Trading Scheme by setting up emission cap and trade rules for high emission industries in seven pilot areas. The shift from the international to domestic market and from an offset program to a true cap and trade mechanism requires several significant changes. This paper reviews the development and evolution of China’s carbon trading market policy instruments. We find that there are substantial changes in both structure and policy. First, Emission Trading Scheme is a broad cap-and-trade mechanism with many new stakeholders added to those already involved in China’s Clean Development Mechanism. Second, the administrative structure is decentralized compared to that of the Clean Development Mechanism. Third, while the Emission Trading Scheme is best thought of as a new policy, China’s experience with the Clean Development Mechanism influences that policy. A large number of Clean Development Mechanism projects are being converted into offsets for the national Emission Trading Scheme market, and many institutional stakeholders that emerged during the Clean Development Mechanism are now involved in the Emission Trading Scheme. The combination of new policies and stakeholders, a decentralization of structure and the conversion of Clean Development Mechanism projects raise questions regarding the integrity of the cap and the enforcement of compliance as the Emission Trading Scheme is expanded into a nationwide system.

Making Carbon Offsets Work in the Developing World: Lessons from the Chinese Wind Controversy

Implementing CDM Limits in the EU ETS: A Law and Economics Approach

Carbon emissions trading in China: the evolution from pilots to a nationwide scheme

Does the different sectoral coverage matter? An analysis of China's carbon trading market

The certified emission reduction (CER) carbon trading market promoted by the clean development mechanism (CDM) has become an important platform for the development of the international carbon market. However, the CER carbon market has shown unsteady development with the present phenomena of price decrease, transaction inactivity, and recession. Against this backdrop, this study aims to explore the intuition behind CER price volatility from the new perspective of internal and external market dynamic linkages. By introducing three homogeneous carbon products of CER futures, namely, the daily dataset of CER spot, EUA (European Union Allowance) spot and EUA futures, and taking five heterogeneous market drivers comprising stock, exchange rates, coal, crude oil, and natural gas into account, we analyze the dynamic correlations and volatility spillovers between CER futures returns and these influencing factors using the DGC-MSV model. With sample data from January 2013 to May 2019, our empirical results show a persistent dynamic dependence between CER futures price and its factors. The homogeneous and heterogeneous markets have significant positive and negative spillover effects, respectively, on the CER futures market. The decline of CER futures price in the post-Kyoto era is due to two aspects: fluctuation of the exchange rate market, which is closely connected to the settlement of currency, and coal price volatility in energy markets. However, the CER futures market has no obvious spillover effect on other markets, except for its strong impact on the CER spot market and weak information spillover to the exchange rate market. Overall, this finding indicates the feeblest financial property of CER carbon futures market.

The Law on Environmental Protection 2020, effective from January 1st, 2022, has specified the development of the carbon credit market in the law, which is considered an effective economic tool. The construction and development of carbon market regulations are an irreversible trend in the general development of the international community. However, the problem is the formation of a transparent, harmonized domestic and international carbon market, without putting too much pressure on businesses, making the most of all the resources that Vietnam has, while ensuring that the development of the carbon market must be associated with response to climate change, towards a low-carbon economy, which requires Vietnam to build a strict legal system throughout a stable process and effectively enforce it. In the process of building a low-carbon economy, from international commitments, Vietnam has affirmed that through the available resources, Vietnam will reduce greenhouse gas emissions while clearly identifying key areas where we can focus on reducing emissions. Therefore, in order to reduce greenhouse gas emissions and develop the carbon market associated with the goal of climate change minimization, aiming to build a low-carbon economy, the domestic carbon market must be built based on a perfect mechanism that can be practically applied in the development trend of society. The article clarifies the issues related to the carbon market, the organization and implementation of the current carbon market, and at the same time, the authors study international experience to propose directions to improve the organization and development of the domestic carbon market.

China has once participated in the international carbon market through the Clean Development Mechanism (CDM) faced problems such as falling certified emission reductions (CER) prices and carbon sink fraud, which led to the decline of China's carbon trading market. However, with China's announcement of the goal of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060, China's carbon market has regained vitality and launched China Certified Emission Reductions (CCER) as the main trading product. The study discusses the opportunities and challenges of China in the globalization of the carbon trading market, including key obstacles such as differences in rules and inconsistent carbon absorption measurement methods. At the same time, the paper proposes strategies such as connecting China's carbon trading market with the global market through the Hong Kong platform, strengthening international cooperation, optimizing market mechanisms, and improving technological innovation capabilities to promote the deep integration and coordinated development of China's carbon trading market with the international market. It emphasizes China's position and role in the global carbon trading system in the future, as well as its positive role in promoting global low-carbon transformation and international exchanges and cooperation.

With the implementation of the pilot Emission Trading Schemes (ETSs) in China since 2013, there emerges a new opportunity for investing in Chinese green technology (greentech) projects. Apart from trading the international CERs (Certified Emissions Reductions), investors nowadays can also trade the CCERs (Chinese Certified Emissions Reductions) in the domestic carbon market. However, the pricing of CCERs is different from that of CERs due to the distinct climate policies in China, thus making the investment decisions in Chinese greentech projects a complicated problem. This study is, to our knowledge, the first attempt to evaluate greentech projects under uncertain climate policies in developing countries like China.
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\nTo identify the investment environment of Chinese greentech projects, a qualitative research on the development of climate policies and greentech market is first conducted. Based on the study of international climate polices and carbon markets, the pricing mechanisms of carbon assets (carbon allowances and carbon offsets) are investigated. Furthermore, China’s climate polices, including the energy policies and emission reduction policies, are analysed in detail. In addition, both the administrative and economic instruments used in China’s climate policies are investigated. Then, business opportunities and challenges in greentech market are investigated. It is shown that there is substantial demand for greentech projects, and the uncertainties embedded a Chinese greentech project in power sector mainly come from the CCER price and electricity price.
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\nTo integrate the different stochastic price processes, a real-options-based greentech investment (ROGI) model is developed to derive the investment options value and the optimal investment timing. Considering the possible interventions of the government, the CCER price is modelled as mean-reverting process with jump and cap-floor. In addition, an equivalent electricity price is developed and also described by a mean-reverting process. To solve the ROGI model with various uncertainties involved, a least-square Monte Carlo (LSM) approach is developed. The proposed LSM algorithm is built within the dynamic programming framework. It is shown that the optimal investment strategy can be characterized by a continuation region.
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\nThe proposed ROGI model is verified by a real case of wind power project investment in China. Sensitive analysis is conducted to examine the effects of the model parameters on the investment decisions. Different climate policy scenarios are then tested, including carbon price jump, carbon price cap and floor, and carbon tax. Several interesting findings are concluded from the results analysis in this study. First, it is found that investors are relatively insensitive to the jump in the CCER price, the volatility of the CCER price, or the mean-reverting speed. Second, the CCER price floor set by the government can effectively encourage greentech investments while the price cap is not a major concern of investors. Finally, the long-term growth rate of the CCER price as well as the carbon tax rate can also plays a significant role in investment decisions.

Maximizing the profitability of forestry projects under the Clean Development Mechanism using a forest management optimization model

In July 2021, China began its national emissions trading scheme, marking a new stage of development for the country’s carbon market. This study analyzes the multidimensional correlation between carbon prices in the Guangdong pilot market and eight influencing factors from three perspectives (the international carbon market, energy prices, and China’s economic situation), using the ARMA-GARCH-vine copula model. The CoVaR between the carbon price and each factor is then calculated using copula-CoVaR. The results show that the crude oil market plays the primary role in the vine structure, and that the carbon market is not strongly correlated with other markets. China’s carbon market is still a regional market driven by government policy, and the international carbon and energy markets (especially the crude oil market) have upward risk spillover effects upon it. This indicates an asymmetric risk spillover between influencing factors and the carbon market. The findings of this study will help market participants prepare risk management strategies and make related investment decisions, and provide a reference for policy makers to formulate national emission trading scheme policies.Graphical abstract

Assessing regional employment effects of the national emission trading scheme in China: Does Okun's law work?

Can CDM bring technology transfer to China?—An empirical study of technology transfer in China’s CDM projects