Carbon Emission Trading System Research Articles

Quantity or quality? The impacts of environmental regulation on firms’ innovation–Quasi-natural experiment based on China's carbon emissions trading pilot

Recently, research on environmental regulation and firms’ innovation has emerged in large numbers. However, the research on the impact of China's carbon emission trading system (CETS) pilot policy on innovation quality is really lack. In order to fill this gap, this paper uses the panel data of China's A-share listed firms in 2008-2016, and adopts difference in difference in difference (DDD) model constructs a quasi-natural experiment on the impacts of CETS on quantity and quality of innovation. The results show that the CETS has a significantly positive effect on the quantity and quality of innovation, but the impact of the CETS on the innovation quantity, low-quality innovation and high-quality innovation are decreasing in turn. The CETS only promotes the innovation quantity and high-quality innovation of state-owned shares firms, large-size firms and eastern-section firms. In addition, according to mechanism test, after the implementation of the CETS pilot, if the government simultaneously reduces subsidies to “treatment group” firms, it can not only enlarge the direct promotion effect of CETS on the quantity and quality of innovation, but also eliminate the offsetting effect of government subsidies on “compliance costs”, thereby Indirectly promote the improvement of the quantity and quality of innovation.

A fully decentralized dual consensus method for carbon trading power dispatch with wind power

The global-based and partition-based dynamic power dispatch problems with wind power integrated into the carbon emission trading system are established and investigated. To meet this challenge, a distributed dual consensus algorithm based the alternating direction method of multipliers is implemented by sharing Lagrangian multipliers associated with coupling constraints between partitioned subproblems rather than phase angles on adjacent buses that are usually shared, thus protecting the key private information of each subsystem. Furthermore, a fully decentralized algorithm is proposed by adopting the finite-time average consensus algorithm, which enables each partition to iteratively approach a consensus of its shared information in a finite number of steps. For comparison purposes, a global-based centralized optimization is implemented at first, adopting the effect of carbon price on the operation of a modified IEEE-30 bus system, followed by tests of the proposed algorithms with three different partitioning methods of power systems. Results illustrate that a higher carbon price can be regarded as an incentive to decrease the wind curtailment rates and spur the increased use of clean fuel. Compared with the results of the centralized optimization, both the algorithms can achieve satisfactory convergence accuracies, although the fully decentralized algorithm requires slightly longer time for computation.

Does China's carbon emission trading policy have an employment double dividend and a Porter effect?

The implementation of China's carbon emission trading policy has targeted achieving emission reduction and environmental protection as well as promoting economic development and technological innovation. The analysis is made through applying the Difference-in-Differences model and using the Ordinary Least Squares method and the Least Square Dummy Variable method in the paper. Results show that the pilot carbon emission trading policy leads to the expansion of employment scales and the reduction of carbon emissions after controlling for the environmental regulation, population size, economic level, and other important variables. Thus, it implies that an employment double dividend exists. For the Porter effect, it is found in the pilot carbon emission trading policy only without adding any control variable. The effect is further verified based on a robustness checks and a placebo test. Furthermore, from the perspective of market-oriented environmental regulation policy, this study explains that the carbon emission trading system launched in 2017 needs to be improved to spread both the employment double dividend and the Porter effect to the whole nation. China also needs to form a complete set of strict ecological environment protection policies and administrative measures to achieve sustainable development of the economy.

Simulation on the effectiveness of carbon emission trading policy: A system dynamics approach

As a flexible market mechanism based on the control of total quantity, the carbon emission trading system aims to achieve economic development while reducing carbon emissions and energy consumption. How to improve the effectiveness of carbon emission trading (CET) policy and achieve the established emission reduction targets have attracted widespread attention from scholars. Taking Guangdong Province as an example, this paper constructed a system dynamics (SD) model to investigate the interaction between internal factors of CET system and simulated the effectiveness of CET policy from 2016-2026. The results indicate that (1) Relative errors between historical data and simulated data are controlled within 5%, which indicates that the system model is suitable to simulate real system. (2) The average sensitivity of the quota variation rate, paid ratio and penalty coefficient are 0.42, 0.56 and 0.29, respectively, indicating that these three parameters can be identified as leverage parameters affecting the efficiency of the CET policy. (3) A single type of policy is difficult to achieve emission reduction targets. The policy portfolio scenario will achieve the reduction target in Thirteenth Five-Year plan of Guangdong, that is, the total amount of quota decreases by 0.5% per year, the paid ratio rises 2% in that ratio per year, and the penalty coefficient is triple the carbon price.

Impact of Carbon Emission Trading System Participation and Level of Internal Control on Quality of Carbon Emission Disclosures: Insights from Chinese State-Owned Electricity Companies

In recent years, the quality of carbon emission disclosures has become a central area of concern for different stakeholders of companies. Specifically, stakeholders of state-owned enterprises (SOEs) want these companies to legitimize their actions regarding carbon emissions reductions reporting. The current study aims to explore the impact of carbon emission trading system participation and the level of internal control on the quality of carbon emission disclosures. Using a sample of Chinese state-owned electricity companies from 2012 to 2018 and employing the difference-in-differences (DID) method, we find a positive impact of the carbon emission trading system participation on the quality of carbon emission disclosures, which suggests that the state-owned electricity companies’ participation in the carbon emission trading system leads to the higher quality of carbon emission disclosures. Likewise, we find a positive relationship between the level of internal control and the quality of carbon emission disclosures, which suggests that the state-owned electricity companies with stronger internal control provide the higher quality of carbon emission disclosures. In addition, we find that the findings are only significant in the case of central SOEs as compared to local SOEs. Our findings contribute to the practical, policy, and research implications as the quality of carbon disclosures is the primary concern from a variety of stakeholders.

Research on the impact of carbon emission trading system on low-carbon technology innovation

Climate change is a major challenge facing human society in the twenty first century. This issue has a significant and far-reaching impact on politics, diplomacy, economy, society, science and technology, and culture. Low-carbon technologies offer an interesting opportunity to mitigate and adapt to climate change. This study uses a difference in difference (DID) model to test how a carbon emission trading system affects low-carbon technology innovation. The results show that low-carbon technology innovation increases year by year under a carbon emission trading system. However, the DID test results show that a carbon emission trading system can inhibit the development of low carbon technology innovation in the short term.

Emission reduction effect and carbon market efficiency of carbon emissions trading policy in China

China has implemented its carbon emission trading system (ETS) in seven pilots since 2013. Many methods have been used to evaluate the effect and efficiency of the ETS in reducing carbon emissions. Evaluating the carbon ETS to determine whether it has co-benefited the economy and environment in the seven pilots is crucial for the development of China. Moreover, different methods of measurement reveal different results on how efficient the seven carbon emission trading markets (ETMs) are. We use the difference-in-differences (DID) method to evaluate the impact of carbon emissions and economic growth following ETS implementation. Based on the data of industrial carbon emissions in 30 provinces of China from 2008 to 2016, the impact of ETS on the carbon emission reduction and economic growth of enterprises is empirically tested. Data envelopment analysis (DEA) evaluates the operating efficiency of the carbon ETMs. Based on the seven carbon emission trading pilots conducted in China in 2014–2016, the carbon ETMs differentiation system in the pilot area is taken as the input index and the ETS implementation effect is used as the output index to construct the full DEA evaluation model for gauging the operation efficiency of the carbon ETMs. The results show that the implementation of the carbon trading policy increases the economic dividend (13.6%) generated by the gross industrial output value, but significantly reduces the emission (24.2%) of industrial CO2 in all seven carbon emission trading pilots. The average DEA efficiency of the seven carbon ETMs operations in China have increased annually.

Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case

A carbon market was introduced for the first time in January 2005, when the EU assigned carbon emission allowances to approximately 15,000 enterprises in 25 countries and established a market for emissions trading. In Korea, the carbon emission trading system started from January 2015 with three phases running up to 2025. As many countries have introduced carbon markets, new evaluation models that consider not only fossil energy prices but also carbon emission costs are necessary because additional costs of using fossil energy might have been incurred due to carbon emissions. The purpose of this paper is to develop a real option model that considers not only the uncertainty of existing fossil energy prices, but also the uncertainty of carbon emission rights prices, in evaluating the economic value of renewable energy R&D. Using the real option model, we attempted to assess the effects of the uncertainty of newly appearing carbon markets on the economic value of renewable energy R&D in Korea empirically. Furthermore, we derived an optimal decision path according to the uncertain future situations of fossil energy and carbon markets by analyzing a trinomial lattice model in which the optimal timings of R&D and deployment are identified.

Delegated Proof of Reputation Consensus Mechanism for Blockchain-Enabled Distributed Carbon Emission Trading System

Most carbon Emission Trading Systems (ETS) rely on a centralized system to manage the transactional tasks, and are vulnerable to security threats. This article proposes a Blockchain-enabled Distributed ETS (BD-ETS) to improve the security and efficiency of the system. The BD-ETS transforms the centralized Carbon Emissions Permit (CEP) trading mode to a distributed trading system in which the trading mode is based on a smart contract performed in Hyperledger Fabric. In a smart contract, every transaction considers both the offer price and reputation value of the emitting enterprises. The voting power of the emitting enterprise is determined by its reputation value, which stems from their contributions to carbon emission reduction. To achieve consistency of every node in the CEP transactions, we propose a Delegated Proof of Reputation (DPoR) consensus mechanism. Compared to the enhanced Delegated Proof of Stake, the DPoR decreases the attack intention of malicious enterprises and performs better in finding malicious miners faster, thus improving the security of the BD-ETS. A case study and numerical simulations are developed to illustrate how the CEP trading functions, and to validate the DPoR mechanism.

碳排放权交易制度对企业全要素生产率的影响——基于上市公司的三重差分实证研究

碳排放权交易制度对企业全要素生产率的影响——基于上市公司的三重差分实证研究

Optimal carbon allowance price in China’s carbon emission trading system: Perspective from the multi-sectoral marginal abatement cost

China’s carbon emission trading system (ETS) was officially launched at the end of 2017 to further promote carbon emissions mitigation. In the ETS, the carbon price is the key factor determining whether the emission reduction target can be achieved. The optimal carbon price is the smallest marginal abatement cost that can achieve the emission reduction target. This study simulates the marginal abatement cost curves of different sectors in China’s ETS and calculate the optimal carbon price of sector coverage scenarios based on the criteria that involve eight sectors in turn. The results show that the marginal abatement cost decreases with increasing sector involvement. The optimal carbon price to achieve the two intensity targets at the same time is between 345 yuan/ton and 1140 yuan/ton. From the sectoral perspective, the power sector undertakes the largest emission reduction, while the transportation sector is responsible for smaller emission reduction. China’s ETS will cause GDP losses from 1.63% to 2.27% compared with the BAU scenario, but it can achieve CO2 reduction from 9.56% to 10.13%.

Sustainable Feasibility of Carbon Trading Policy on Heterogenetic Economic and Industrial Development

A carbon emission trading system (ETS) is an effective market mechanism for promoting the reduction of global greenhouse gas emissions and achieving sustainable development between the economy and the environment. To analyze the emissions reduction effect and economic effect of China’s ETS and further discuss the mechanisms of economic development differences and industrial development differences on the final effect of the policy, this study adopts the propensity score matching-difference in differences method and triple difference method. The empirical results show the following: (1) The ETS can simultaneously achieve both the emissions reduction effect and economic effect when key control variables are included. (2) The population, carbon emissions intensity and per capita GDP have significant positive impacts on carbon emissions; the environmental pollution control intensity, research structure, and research intensity have negative impacts on carbon emissions; and the capita stock, employment, and energy consumption have significant positive economic effects. (3) The ETS has a stronger inhibitory effect on the provinces with higher levels of economic and service development compared to the provinces with lower levels of economic and service development. In contrast, the policy has a weaker inhibitory effect on provinces with higher levels of industrial and construction development compared with the lower level provinces.

The impacts of emission trading scheme on China’s thermal power industry: A pre-evaluation from the micro level

Emission trading scheme is known as a cost-effective measure for mitigating CO2 emissions, and recently, China has started the world's largest carbon trading system. As the most influential industry in determining China's overall CO2 emission level, the thermal power industry will be greatly affected by nationwide carbon market in the near future. This paper explores the impact of the upcoming national emission trading scheme on China's thermal power industry at firm level. First, based on empirical data of 478 thermal power plants, an empirical analytical framework of micro-firm level is constructed. Then, two kinds of policy scenarios, including no carbon emission trading and national emission trading scheme, in two different market structures have been analyzed. The results show that emission trading scheme have positive impacts on reduction of CO2 emissions among China’s power plants and can reduce the total abatement costs by 0.37%–41.5%. Furthermore, most of the thermal power plants are emissions permits buyers including all the low-emission gas-fired power plants. Additionally, compared with the perfect competition market, more than 70% of thermal power plants increase their total abatement costs in imperfect competition market. These findings provide reference for promoting the development of nationwide carbon emission trading system in China.

The efforts of Taiwan to achieve NDC target: an integrated assessment on the carbon emission trading system

In this paper, we adopt a computable general equilibrium model to investigate the impacts of achieving Taiwan’s target of nationally determined contributions (NDC). We consider two types of scenarios: one implemented with the emission trading system (ETS) and the other designed under cap without trade. Our findings suggest that Taiwan’s NDC target is achievable in two policies but with different economic costs. On the one hand, ETS reconciles the demand and supply for emission allowances. More participants in the ETS increase the chance that a buyer can match the seller; moreover, the carbon price is lower. On the other hand, in the cap-without-trade scenario, industrial sectors have to pay higher prices for emission allowances if there is no market for emission–allowance exchanges. Furthermore, we find that the initial distribution of free emission allowances affects not only sectoral emissions but also GDP loss. In 2030, the GDP loss ranges from 1.8 to 2.2% in the cap-without-trade scenario and around 1.8% in the ETS. Therefore, the ETS helps achieve Taiwan’s NDC target with a lower economic loss. Taiwan, an independent energy system isolated from other countries or regions, can achieve its NDC target with the launch of ETS.

Research on public institutions carbon quota allocation scheme in Shenzhen

The problem of high energy consumption in public institutions has become increasingly prominent, and China has not implemented carbon trading mechanisms in the public institutions at present. This paper firstly analyzes the energy consumption of public institutions in Shenzhen, and then formulates the carbon quota allocation scheme for public institutions in Shenzhen. The historical method and baseline method are used to allocate carbon quotas to public institutions in Shenzhen, and the energy consumption data calculated by the two methods are compared with real energy consumption data. The results show that there are large differences among public institutions, it is difficult to find a suitable baseline, and the historical method is more suitable for the initial allocation of carbon emission quotas. Finally, the effectiveness of the carbon quota allocation scheme is evaluated, hoping to provide a reference for the establishment of a carbon emission trading system for public institutions in Shenzhen.

The profitability of onshore wind and solar PV power projects in China - A comparative study

Despite the rapid development of renewable energy power in China, the sector is facing significant challenges in the form of declining feed-in tariffs (FIT) and serious curtailment problems. However, in the long-run the nationwide carbon emission trading system may provide a new economic incentive to invest in renewable energy projects in China. Against this background, we assess the effect of gradually declining FIT on the profitability of renewable energy power projects in China and evaluate the potential of a carbon price to overcome the resulting financial gap. Based on a dataset of 1552 onshore wind and 414 solar PV power projects from 2010 to 2015, we first estimate the levelized cost of electricity (LCOE) for onshore wind and solar PV investments. We then estimate profitability using different carbon prices and varying levels of FIT. Our findings suggest that revenues from selling certified carbon emissions reductions in the carbon market can compensate partially for the revenue losses caused by declining FIT. However, the current carbon prices of China's carbon-emission trading pilot schemes are not sufficiently high to compensate for revenue losses. For 90% of PV projects to remain profitable with lower FIT, the carbon price would need to rise to USD 64/t of CO2. For on-shore wind plants, lower carbon price levels of up to USD 41/t CO2 would be sufficient.

China's emissions trading system and an ETS-carbon tax hybrid

China is introducing a national carbon emission trading system (ETS), with details yet to be finalized. The ETS is expected to cover only the major emitters but it is often argued that a more comprehensive system will achieve the emission goals at lower cost. We first examine an ETS that covers both electricity and cement sectors and consider an ambitious cap starting in 2017 that will meet the official objective to reduce the carbon-GDP intensity by 60–65% by 2030 compared to 2005 levels. The two ETS-covered industries are compensated with an output-based subsidy to represent the intention to give free permits to the covered enterprises. We then consider a hybrid system where the non-ETS sectors pay a carbon tax and share in the CO2 reduction burden. Our simulations indicate that hybrid systems will achieve the same CO2 goals with lower permit prices and GDP losses. We also show how auctioning of the permits improves the efficiency of the ETS and the hybrid systems. Finally, we find that these CO2 control policies are progressive in that higher income households bear a bigger burden.

Research on the Countermeasures for Power Generation Enterprises under the Impact of Carbon Emission Trading System

Power generation is the primary source of carbon emissions in power production. To manage the carbon emissions from power generation companies is meant for the successful realization of carbon emission reduction targets in the power industry. Under the background of the gradual establishment and improvement of the national carbon emission trading market, it is very necessary to research the impact of carbon emission trading system on power generation enterprises and the strategies adopted under this influence. This paper discusses the impacts from four perspectives: power generation space, power generation cost, power generation rights transfer, and production and operation decision-making. It also put forward the corresponding decision-making plan, being intended to make relevant and valuable reference for the power generation enterprises on carbon asset management, production and operation management and investment plan selection.

Bi-level allocation of carbon emission permits based on clustering analysis and weighted voting: A case study in China

A rational regional allocation scheme of carbon emission permits is important for establishing the nationwide carbon emission trading system (ETS) of China. Considering the vast area and great regional differences in China, a novel bi-level allocation scheme based on clustering analysis and a weighted voting model is proposed in this research. At the first level, 30 regions in China are clustered into four classes according to their characteristics of carbon emissions, which include emission reduction pressure, capacity, responsibility and potential. Then the total carbon emission permits are allocated to each class of regions. At the second level, carbon emission permits are allocated to each province (municipality) within a class. The weighted voting models are developed for both the two levels, where the allocation schemes based on historical emissions, population and GDP are selected by each region according to the different voting rights of each region. The voting rights of each region for choosing its inclined scheme are quantified through a multi-index comprehensive evaluation, which employs the entropy method at the first level due to the lack of prior knowledge and the analytic hierarchy process (AHP) at the second level to increase policy flexibility. The combination of subjective weighting evaluation method (AHP) and objective weighting evaluation method (the entropy method) increases the flexibility of the abatement policy while guaranteeing the objectivity of decision-making process. Case studies of the allocation for carbon emission permits in China by 2020 and 2030 are carried out under the proposed allocation scheme. The derived allocation results show that the proposed allocation scheme can provide a balanced consideration to equality and efficiency, which are compared with those in reported literatures. The proposed allocation scheme can not only encourage all regions to reduce carbon emission intensity, but also achieve in meeting the carbon emission demand of the population in each region.

Simulating a Carbon Trading Advantage from the Municipal Solid Waste Management: The Role of Waste-to Carbon in Malaysia

Management of municipal solid waste in Malaysia has proved to be efficiently, effectively, and adequate. This study has used existing literature and empirical evidences for analyzing the various issues related to carbon emission trading and solid waste management. A measurement of carbon potential value will be conduct after the municipal solid waste generation data was collected completely, and review the advantage of carbon emission trading from the municipal solid waste management in Malaysia, evaluate the benefit of carbon emission trading as an alternative investment tools and basic framework required to implement them. The article suggests that how an appropriate carbon emission trading system may give more benefit and economical value, and sustainable way of developing the future income generation in environmental sector in Malaysia. In other hand, the changing legislative environment is likely to make current practices highly non-optimal and increase pressures for a change of waste management strategy. The article will become more valuable to all those who have some interests in environmental economic and alternative investment sectors and would like to reduce the global warming and climate change effect and develop the potential value related to carbon emission trading in developing countries.