Carbon Trading Policy Research Articles

碳交易政策实施策略的评估与改进

碳交易政策实施策略的评估与改进

A Fuzzy Stochastic Model for Carbon Price Prediction Under the Effect of Demand-related Policy in China's Carbon Market

The establishment of China's carbon market has an obvious policy-oriented feature, and the carbon price is easily affected by demand-related policies within a compliance period. As prior models cannot help with clear simulation of the volatility of carbon price in China, this paper develops a fuzzy stochastic model to predict such price under the effect of demand-related policy. First, we quantify corporate final profit obtained from carbon trading based on different free allowance policies to measure the actual allowance demand in the carbon market. Second, based on such demand, we add the fuzzy number in each parameter of a stochastic differential equation and then develop a fuzzy stochastic model that can help to analyse the effect of demand-related policy on carbon price in the immature carbon market. Third, by analysing the demand-related policy formulated in the second-developing-phase of the Shanghai Environment and Energy Exchange (from Nov. 17 in 2016) through our model, we predict the price trend after each demand-related policy publication. Experimental results reveal the accurate fitting effect of the developed model that can help to estimate the supply-and-demand in the carbon market and evaluate the effectiveness of current carbon trading policy as well. Further, our model can provide a robust theoretical implication for both corporate carbon trading strategies and governmental regulations on carbon demand-related policy.

Can China’s Carbon Emissions Trading Rights Mechanism Transform its Manufacturing Industry? Based on the Perspective of Enterprise Behavior

The pilot policy of carbon emissions trading rights covers six heavy pollution industries in the manufacturing industry and has achieved considerable emission reductions. Based on enterprise behavior, this study analyzes the impact of the carbon emissions trading rights pilot policy on the productivity of manufacturing enterprises. In addition, we examine whether the pilot policy can aid in the transformation and upgrading of China’s manufacturing industry. Furthermore, we examine the influence of carbon emissions trading rights on manufacturing enterprises of different sizes and with different property rights. The results show that the trading rights have not produced a “Porter effect” on the productivity of manufacturing enterprises in China or in subsamples based on the nature of enterprise ownership. The impact of the carbon trading rights on the productivity of state-owned manufacturing enterprises in the pilot provinces is based on the compliance cost hypothesis. Therefore, the pilot policy has yet to achieve coordinated economic, social, and environmental development. Lastly, we put forward several policy suggestions on the coordinated development of a carbon trading policy and manufacturing enterprises from the perspective of the government, enterprises, and society.

Modelling and optimization of a manufacturing/remanufacturing system with storage facility under carbon cap and trade policy

Abstract Due to rigorous environmental legislations and competitive economics worldwide, a growing number of companies are devoted to recovering and remanufacturing used products. Consequently, over the past few decades, the management of manufacturing/remanufacturing systems has been receiving increasing attention from researchers and companies leaders. Most of the existing research papers in the literature considered that remanufactured products have the same quality and price as new ones. However, in practice, the market perceives new items as higher quality products rather than remanufactured items. This paper aims to bridge the gap in research on manufacturing/remanufacturing supply chain, by investigating an optimal storage and manufacturing/remanufacturing planning, while taking into consideration the difference between new and remanufactured items, random machine failures, carbon constraints and distinct random customer demands for both items types. Furthermore, to make our system more realistic, it is assumed that the return rate of used items depends on the sales in the past periods, machine repair time is stochastic and set-up time period is not negligible. In this study, two models are developed, considering carbon emissions or not, to determine the optimal values of the manufacturing/remanufacturing period lengths and serviceable stock capacities of new and remanufactured items. Numerical results are provided to illustrate the impact of set-up cost, percentage of returned used items, machine availability, carbon cap and carbon trading price on the optimal storage and production planning. Moreover, the influences of carbon cap, carbon trading price and percentage of returned used items on carbon emissions have been analyzed. The results reveal that set-up cost, percentage of returned used items and machine availability have significant impact on storage and production planning of new and remanufactured items. In addition, the results indicate that a lower carbon cap and/or a high carbon trading price, induce the producer to collect and remanufacture used items and curb carbon emissions.

Empirical Analysis of Carbon Trading Policy Applicability in Transportation

Carbon trading policy, as an important1 approach to energy conservation and emission reduction, is being applied by an increasing number of cities at home and abroad with a certain effect. Meanwhile, traffic is a major source of energy consumption and carbon emission in cities and thus a main field of energy conservation and carbon emission and a carbon emission trading object in cities. Globally, the carbon trading policy is rarely adopted in the traffic sector. Emission monitoring and quota allocation are challenging tasks due to several characteristics, such as the mobility and dispersibility of vehicles and non-profitability of certain sectors. Therefore, the inclusion of the transportation sector in the carbon emission trading policy framework remains an issue. On the basis of the definition of the carbon emission trading policy framework, this study draws certain elements of applicability of carbon emission trading policy and conducts an empirical analysis of the applicability of the participation of the transportation sector in carbon emission trading.

How China's current carbon trading policy affects carbon price? An investigation of the Shanghai Emission Trading Scheme pilot

Abstract To better establish a unified carbon market in China, this study evaluates the effect of current carbon trading policy and further investigates the relationship between such policy that is published during the second phase of Shanghai Environment and Energy Exchange (SEEE) and Shanghai Emission Allowance (SHEA) price. We aim to analyze whether these policies can improve the operation efficiency of current carbon market. By the Mean Reversion Test, Cox-Ingersoll-Ross (CIR) Model, and Event Study Method, we first analyze the potential price discovery function of SHEA products, thereby describing the transmission channel of current policy to SHEA price. Then we examine the effect of carbon policies published in different periods on their corresponding SHEA price. By the Auto-correlation Test and CIR simulation, we find that 3/4 of all auto-correlation values are less than 0 after Apr. 2017, and the minimum cumulative error is 31.3792 under the supply and demand channel. These findings imply that SHEA price has the discovery function at the middle and end of trading period, and the current policy affects SHEA price through its effect on the fundamentals of supply and demand. Further, more than 60% of all r-values (r-value that reflects the response of price to policy) are less than 1, which implies that the published policy will improves future SHEA price. Accordingly, we argue that SEEE belongs to a policy-oriented market, and the change of carbon price is closely related to emission allocation policies. In this case, China's government should further push forward the smooth operation of current carbon market by the aid of incentive policy in the coming period.

An optimization study of a palm oil-based regional bio-energy supply chain under carbon pricing and trading policies

Biomass residues due to their low bulk density typically require frequent transportation from biomass plantations in rural areas to conversion bio-energy power plants. This issue contrasts with environmental protection strategies, especially when power plants are facing different carbon reduction policies that enforce them to emit less than a given specific carbon amount. Although several researchers have investigated bio-energy supply chains concerning environmental policies, the majority of studies have been devoted to strategic decisions over a single planning period. This paper presents a multi-period bio-energy supply chain under carbon pricing (carbon tax) and carbon trading (cap-and-trade) policies at the tactical planning level. A mixed-integer linear programming model was adopted to optimize the proposed regional oil-palm biomass-to-bio-energy supply chain planning model. The numerical results indicate that when carbon pricing is in place when carbon tax increases linearly, carbon emissions’ reductions have a nonlinear trend, whereas both cost increase and carbon emissions’ reductions have a relatively upward trend in the carbon trading scheme. This paper also presents the sensitivity analysis of the proposed model regarding cost, emissions’ generation and supply chain performance. Finally, the paper recommends several significant practical implications and policy-making insights for managers and policymakers.

Incorporating the transport sector into carbon emission trading scheme: an overview and outlook

The transport sector is a major consumer of fossil fuels and, consequently, one of the largest sources of greenhouse gas emissions and air pollutant emissions. In recent years, global transport’s emissions have experienced a remarkable increase and will become a crucial cause of global warming in the next few decades. The public has become well aware of the issues regarding carbon emissions in this sector, and reducing greenhouse gases has also become a regulatory agenda of governments around the globe. Emissions trading schemes are considered one of the most cost-efficient ways of controlling greenhouse gas emissions and have been implemented by many countries around the world. While several countries have already incorporated the transport sector into their emissions trading schemes, China is in the process of incorporating a part of the transport sector into its emission trading scheme pilots. Introducing a market mechanism to reduce carbon emissions in the transport sector is still at a nascent stage and much is still to be explored. This paper explores the current development and challenges of applying carbon trading mechanisms in the transport sector around the world. Then, the paper analyzes the policies and current developments of incorporating the transport sector in China’s carbon trading pilots. Several suggestions are then provided in regard to options on transport sector entities coverage, initial allowance allocation models, integration of carbon trading policies with existing policies, collection of transportation statistics and rolling out a nationwide carbon trading system.

Bias present in US federal agency power plant CO2 emissions data and implications for the US clean power plan

Power plants constitute roughly 40% of carbon dioxide (CO2) emissions in the United States. Climate change science, air pollution regulation, and potential carbon trading policies rely on accurate, unbiased quantification of these large point sources. Two US federal agencies—the Department of Energy and the Environmental Protection Agency—tabulate the emissions from US power plants using two different methodological approaches. We have analyzed those two data sets and have found that when averaged over all US facilities, the median percentage difference is less than 3%. However, this small difference masks large, non-Gaussian, positive and negative differences at individual facilities. For example, over the 2001–2009 time period, nearly one-half of the facilities have monthly emission differences that exceed roughly ±6% and one-fifth exceed roughly ±13%. It is currently not possible to assess whether one, or both, of the datasets examined here are responsible for the emissions difference. Differences this large at the individual facility level raise concerns regarding the operationalization of policy within the United States such as the recently announced Clean Power Plan. This policy relies on the achievement of state-level CO2 emission rate targets. When examined at the state-level we find that one-third of the states have differences that exceed 10% of their assigned reduction amount. Such levels of uncertainty raise concerns about the ability of individual states to accurately quantify emission rates in order to meet the regulatory targets.

Impact of Asymmetric Carbon Information on Supply Chain Decisions under Low-Carbon Policies

Through the establishment of the leading manufacturer Stackelberg game model under asymmetric carbon information, this paper investigates the misreporting behaviors of the supply chain members and their influences on supply chain performance. Based on “Benchmarking” allocation mechanism, three policies are considered: carbon emission trading, carbon tax, and a new policy which combined carbon quota and carbon tax mechanism. The results show that, in the three models, the leader in the supply chain, even if he has advantages of carbon information, will not lie about his information. That is because the manufacturer’s misreporting behavior has no effect on supply chain members’ performance. But the retailer will lie about the information when he has carbon information advantage. The high-carbon-emission retailers under the carbon trading policy, all the retailers under the carbon tax policy, and the high-carbon-emission retailers under combined quotas and tax policy would like to understate their carbon emissions. Coordination of revenue sharing contract is studied in supply chain to induce the retailer to declare his real carbon information. Optimal contractual parameters are deduced in the three models, under which the profit of the supply chain can be maximized.

The Distribution of Climate Change Public Opinion in Canada

Historic Canadian elections in 2015, both federally and provincially, created an opportunity for action on climate policy. While climate scientists have developed high resolution data sets on the distribution of Canadian climate risks, we still lack comparable data on the local distribution of public climate change opinions. This paper provides the first effort to estimate local climate and energy opinion variability outside the United States. Using a multi-level regression and post-stratification (MRP) approach, we estimate opinion in federal electoral districts and provinces. We demonstrate that a majority of the Canadian public consistently believes that climate change is happening. Belief in climate change's causes varies geographically, with more attributing it to human activity in urban as opposed to rural areas. Most prominently, we find majority support for carbon cap and trade policy in every province and district. By contrast, support for carbon taxation is more heterogeneous. Compared to the distribution of US climate opinions, Canadians believe climate change is happening at higher levels. This new opinion data set will support climate policy analysis and climate policy decision making at national, provincial and local levels.

Optimal Strategies for Low Carbon Supply Chain with Strategic Customer Behavior and Green Technology Investment

Climate change is mainly caused by excessive emissions of carbon dioxide and other greenhouse gases. In order to reduce carbon emissions, cap and trade policy is implemented by governments in many countries, which has significant impacts on the decisions of companies at all levels of the low carbon supply chain. This paper investigates the decision-making and coordination of a low carbon supply chain consisting of a low carbon manufacturer who produces one product and is allowed to invest in green technology to reduce carbon emissions in production and a retailer who faces stochastic demands formed by homogeneous strategic customers. We investigate the optimal production, pricing, carbon trading, and green technology investment strategies of the low carbon supply chain in centralized (including Rational Expected Equilibrium scenario and quantity commitment scenario) and decentralized settings. It is demonstrated that quantity commitment strategy can improve the profit of the low carbon supply chain with strategic customer behavior. We also show that the performance of decentralized supply chain is lower than that of quantity commitment scenario. We prove that the low carbon supply chain cannot be coordinated by revenue sharing contract but by revenue sharing-cost sharing contract.

Impact of Different Carbon Policies on City Logistics Network

A programming model for a four-layer urban logistics distribution network is constructed and revised based on three types of carbon emissions policies such as Carbon tax, carbon emissions Cap, Carbon Trade. Effects of different policies on logistics costs and carbon emissions are analyzed based on a spatial Logistics Infrastructure layout of Beijing. Research findings are as follows: First, based on low-carbon policies, the logistics costs and carbon emissions can be changed by different modes of transport in a certain extent; second, only when carbon taxes and carbon trading prices are higher, carbon taxes and carbon trading policies can reduce carbon emissions while not significantly increase logistics costs at the same time, and more effectively achieve carbon reduction targets than use carbon cap policy.

Foreign policy ‘trilemmas’: understanding China's stance on international cap-and-trade

This article uses a policy analogy approach to explore China's attitude toward the possibility of global carbon market integration, including the development of a common cap-and-trade market for the global civil aviation industry. Like in other foreign policy domains, in international cap-and-trade, China faces a ‘trilemma’ between carbon market integration, state sovereignty and policy flexibility. By referring to how China has approached a comparable trilemma in foreign exchange policy making, we analyse China's possible stance on international cap-and-trade. We argue that China will prefer to gradually establish and strengthen, to a limited extent, intergovernmental governance mechanisms, which allow nation-states to prioritize sovereignty and policy flexibility in carbon trading policy making. In the conclusion we use this argument to explain China's responses to the carbon-trading initiatives of Australia, the EU, the International Civil Aviation Organization (ICAO), and the World Bank.Policy relevanceThe international community has reached a consensus on the use of market mechanisms for mitigating climate change. While opposing the EU's plan to include Chinese airlines in the EU Emissions Trading Scheme, China has started to co-explore with Australia the possibility of linking their carbon markets, and has adopted a supportive attitude toward the carbon trading initiatives led by the ICAO and the World Bank. Considering China's status as the largest emitting country of GHGs and its interdependence with major developed and developing countries, China's substantial participation would be crucial to the success of the global market-based efforts to reduce GHG emissions. This article presents an initial attempt to develop a better understanding of China's stance on international cap-and-trade.

Multi-item production planning with carbon cap and trade mechanism

Carbon emission control becomes a challenge in recent years, and carbon emission trading is an effective way to curb carbon emission. This paper investigates the multi-item production planning problem with carbon cap and trade mechanism, in which a firm uses a common capacity and carbon emission quota to produce multiple products for fulfilling independent stochastic demands, and the firm can buy or sell the right to emit carbon on a trading market of carbon emission. A profit-maximization model is proposed to characterize the optimization problem. The optimal policy of production and carbon trading decisions is analyzed, and an efficient solution method with linear computational complexity is presented for solving the optimal solution. The impacts of carbon price, carbon cap on the shadow price of the common capacity, production decisions, carbon emission and the total profit are investigated. The comparisons of the carbon cap and trade policy and the taxation policy are given to show the effectiveness of the policies. Numerical analyses are presented for illustrating our findings and obtaining some managerial insights and policy implication. ► We investigate a capacitated multi-item production planning problem with carbon cap and trade mechanism. ► The optimal policy and an efficient solution method are proposed. ► The impacts of the carbon cap and trade mechanism on the system performance are analyzed. ► We show the taxation policy is a special case of the carbon cap and trade policy in the studied system. ► Managerial insights are obtained for business managers to understand the impact of carbon emission control.

Forests in climate policy: technical, institutional and economic issues in measurement and monitoring

Despite the economic and environmental significance of the world’s forests, we have limited data about them. Estimates of deforestation in tropical countries and rates of reforestation or afforestation in boreal and temperate countries are inconsistent. Accordingly, estimates of emissions released in deforestation vary widely and range from 7% to 17% of all sources of greenhouse gas (GHG) emissions. The lack of good data severely hampers efforts to shape climate policy because it is difficult to model the role of forests both in the physical global carbon (C) cycle and in cost-effective regimes to abate GHG. Data limits strain the capacity of even the best models to estimate marginal cost functions for forest carbon (C) sequestration. It is technically possible to obtain better information, but for institutional and economic reasons these technologies have not yet been fully deployed. The emergence of carbon (C) trading or tax policy in which forest carbon (C) storage becomes valued would strengthen incentives to supply better data, as would nonmarket regulation if it elicited a shadow value of forest carbon (C) in substituting for reductions in greenhouse gas emissions. “Geo-wiki” may provide a short-term solution to at least part of the data problem. The ultimate solution is the development of a comprehensive forest monitoring system involving remote sensing and on-the-ground truthing. This paper briefly discusses the role of forests in climate policy and then describes data gaps, the capability of technology to fill them, the limits of institutions and budgets in realizing this capability, and possible near-term solutions.

Low-Carbon Economy: Terms of Trade and Welfare Effect of China

Controlling CO2 emissions without hindering economic development is a major challenge for China. Carbon barrier is a new trade barrier related with carbon trading, which will be a new tool of protectionism in foreign trade. This article expounds the relationship between international trade and economic growth by a standard trade model, analyzes the impact on trade and economic growth of carbon barrier by join a new variable in the model. We suggest that China should create a favorable international environment, draw up carbon trading policies and regulations, actively participate in international carbon trading, fight for pricing by boosting domestic carbon trading market, and take an active and effective adjustment of its industrial structure, increasing the share of service trade as well as other low-carbon forms and methods of trade to cope with the challenge.