Emissions Trading Systems In China Research Articles

Does the emissions trading system promote regional green innovation? – Evidence from Chinese prefecture-level cities

ABSTRACT The previous economic development model based on scale expansion has caused serious environmental pollution and resource constraints. Therefore, the development of green innovation with clean production and environmental protection as the core is particularly important. The emissions trading system (ETS) has been introduced in the process of market-oriented environmental regulation, and its impact on green innovation is of great significance. This paper examines the impact of the ETS on regional green innovation and its mechanism of action using the PSM-DID method based on data from 154 prefecture-level cities in China. The study finds that the ETS has a positive effect on improving green innovation, and this effect gradually increases over time. The impact mechanism test shows that the ETS promotes green innovation by increasing regional innovation R&D investment, and the regional business environment plays a positive role in this process. Heterogeneity tests show that the effects of ETS are more pronounced in more polluted regions and in regions with stricter environmental regulations. This paper provides theoretical support for the implementation of ETS in China and some developing countries, and empirical evidence and policy implications for the green innovation effect of ETS.

Where will corporate capital flow to? Revisiting the impact of China's pilot carbon emission trading system on investment

As a policy instrument to address climate change, the Carbon Emissions Trading System (ETS) will directly affect the location choice and development strategies of high-emitting firms' off-site investments, which is crucial to achieve optimal allocation of capital factors and coordinated development among regions. Using data of Chinese listed companies from 2007 to 2020, this study assesses for the first time the impact of Carbon Emissions Trading System on regulated firms' off-site investment strategies at the firm level using the Heterogeneity-Robust Difference-in-differences approach. The estimation results indicate that (1) the Carbon Emissions Trading System leads to about 20% reduction in off-site investment by regulated firms, which is mainly reflected in cross-city investment; (2) the heterogeneous investment effect is more obvious in private enterprise groups, but not in state-owned enterprise groups. Government intervention influenced the investment decisions of enterprise groups to make their development strategies more consistent with local economic growth objectives; (3) regulated enterprise groups significantly expanded their production layout locally and reduced off-site production investment; (4) the Carbon Emissions Trading System will promote long-term performance improvement of regulated firms. The above results are enlightening for the construction of Carbon Emissions Trading System in China and provide a new perspective for theoretically assessing the impact of Carbon Emissions Trading System on the competitiveness of enterprises.

Agricultural Ecological Efficiency under the Carbon Emissions Trading System in China: A Spatial Difference-in-Difference Approach

The agriculture sector plays a significant role in the development of the national economy and providing raw materials to the industrial sector. Trying to get more agricultural productivity, most farmers ignored the adverse effects of agricultural chemicals or pesticides that have a negative impact on the environment. So, the importance of agricultural ecological efficiency needs to be understood. This study attempts to explore whether agriculture, as an important source of carbon dioxide production, can have an effective impact on the agricultural ecological efficiency of carbon trading pilot policies in the context of the global implementation of carbon trading. This study evaluated the agricultural ecological efficiency (AEE) and its spatial distribution characteristics of 31 provinces in China, the data period was from 2000 to 2018. By applying the spatial difference-in-difference (SDID) approach, the study investigates the effects of low-carbon policies on agricultural ecological efficiency in pilot areas. The results demonstrate that low-carbon trading pilot policies have a significant impact on agricultural ecological efficiency. At the same time, the effects of regional economic development, population growth, urbanization, and urban innovation on efficiency are also significant. The improvement of agricultural ecological efficiency requires not only the full implementation of low-carbon trading pilot policies but also the development of regional economy and high-quality agriculture. The findings provide further policy recommendations for high-quality agricultural development.

The impact of emissions trading system on corporate energy efficiency: Evidence from a quasi-natural experiment in China

This study investigates the effects of market-incentive environmental regulations on corporate energy efficiency. Using the SO2 emissions trading system in 2007 in China as a quasi-natural experiment, we employ the difference-in-difference-in-differences approach based on Chinese firm-level data from 2003 to 2010, and empirically examine whether the emissions trading system in China has achieved a win-win situation between environmental effects and energy efficiency. The results show that the implementation of the emissions trading system does improve the energy efficiency of firms. A plausible mechanism appears to be the strengthening of front-end prevention of firms, through which firms reduce their usage of primary energy to transform energy structure, thus improving their energy efficiency. The heterogeneity analysis shows that the results are more pronounced for private and export-oriented firms, firms with larger sizes, firms in the lifecycle of maturity or decline and firms that are capital-intensive. This study provides clear implications by shedding light on the effects of market-incentive environmental regulations on energy efficiency.

Emissions trading systems and social equity: A CGE assessment for China

Carbon dioxide emissions trading systems (ETS) are an important market-based mitigation strategy and have been applied in many regions. This study evaluates the potential for a national ETS in China. Using a dynamic computable general equilibrium (CGE) model with detailed representations of economic activity, emissions, and income distribution, we examine alternative mitigation policies from now until 2050. Based on statistical and survey data, we disaggregate the labor and household sectors and simulate the impacts of ETS policies on the incomes of different household groups. We find that ETS has the potential to reconcile China’s goals for sustained, inclusive, and low-carbon economic growth. Results show some key findings. First, the number of unemployed people in energy-intensive industries such as coal and construction will continue to increase; by 2050, employment in the coal industry will decline by 75%. Second, if the scope of the carbon market extends to all industries in China, carbon market revenues will continue to increase, reaching a maximum of 2278 billion yuan ($336 billion) in 2042 to become the world's largest carbon market. Third, the distribution of benefits from the national ETS can help achieve greater social equity. By comparing different distribution policies, we find that the combination of targeted subsidies for unemployed coal workers and direct household subsidies based on proportional per capita will reduce the social income gap to the greatest extent compared with other scenarios. By 2050, this distribution policy will reduce the Gini coefficient in China by 10% compared to the Business as Usual (BAU) scenario.

Effectiveness of pilot carbon emissions trading systems in China

ABSTRACTChina is in the process of establishing a national emissions trading system (ETS). Evaluating the implementation effectiveness of the seven pilot ETSs in China is critical for designing this national system. This study administered a questionnaire survey to assess the behaviour of enterprises covered by the seven ETS pilots from the perspective of: the strictness of compliance measures; rules for monitoring, reporting and verification (MRV); the mitigation pressure felt by enterprises; and actual mitigation and trading activities. The results show that the pilot MRV and compliance rules have not yet been fully implemented. The main factors involved are the lack of compulsory force of the regulations and the lack of policy awareness within the affected enterprises. Most enterprises have a shortage of free allowances and thus believe that the ETSs have increased their production costs. Most enterprises have already established mitigation targets. Some of the covered enterprises are aware of their own internal emission reduction costs and most of these have used this as an important reference in trading. Many enterprises have accounted for carbon prices in their long-term investment. The proportion of enterprises that have participated in trading is fairly high; however, reluctance to sell is quite pervasive in the market, and enterprises are mostly motivated to trade simply in order to achieve compliance. Few enterprises are willing to manage their allowances in a market-oriented manner. Different free allowance allocation methods directly affect the pathways enterprises take to control emissions.Key policy insightsIn the national ETS, the compulsory force of ETS provisions should be strengthened.A reasonable level of free allowance shortage should be ensured to promote emission reduction by enterprises.Sufficient information should be provided to guide enterprises in their allowance management to activate the market.To promote the implementation of mitigation technologies by enterprises, actual output-based allocation methods should be used.The government should use market adjustment mechanisms, such as a price floor and ceiling, to ensure that carbon prices are reasonable and stable, so as to guide long-term low carbon investment.

How will sectoral coverage affect the efficiency of an emissions trading system? A CGE-based case study of China

This study contributes to the existing literature on optimal carbon mitigation policy by quantifying the impacts of various sectoral coverage options for the emissions trading systems (ETS) used to achieve China’s Intended Nationally Determined Contribution (INDC) targets for the Paris Agreement on climate change. The CHEER model, a computable general equilibrium (CGE) model of China with detailed representation of electricity and other energy intensive sectors, as well asa complete CO2 emissions accounting module and carbon market, is used in this study. Results show several important findings. First, China’s INDC targets can be achieved through an economy-wide ETS at an economic cost of 2.1% of real GDP by 2030. Second, including only the eight sectors proposed for initial implementation of the ETS in China is likely to result in a much larger mitigation cost than the economy-wide approach, estimated to be as high as 10.5% of 2030 real GDP. Thirdly, this study further indicates that the mitigation costs can be reduced to 3.3% of real GDP in 2030 if other energy-intensive sectors, accounting for additional 24.8% of total emissions, are included in the ETS. Asa result, not all sectors are required to get close to the first-best mitigation option so long as critical sectors are not excluded. In addition, the temporal dimension of mitigation costs and air pollution co-benefits under different sectoral schemes of China’s ETS gives policy-makers a degree of short-run flexibility in terms of phasing in additional industries over time.

The economic impact of carbon pricing with regulated electricity prices in China—An application of a computable general equilibrium approach

We use a dynamic CGE model (SICGE) to assess the economic and climate impacts of emissions trading system (ETS) in China with a carbon price of 100 Yuan/ton CO2. A particular focus is given to the regulated electricity price regime, which is a major concern of electricity sector’s cost-effective participation in ETS in China. We found: (1) Carbon pricing is an effective policy for China to reduce CO2 emissions. Total CO2 emissions reduction ranges from 6.8% to 11.2% in short-term. (2) Rigid electricity price entails lower CO2 emissions reduction but can be considered as a feasible starting point to introduce carbon pricing policies in short-term as long as governmental subsidies are given to electricity production. (3) In mid- and long-term, the efficient policy is to earmark carbon revenue with competitive electricity price. We propose to use carbon revenue to reduce consumption tax in the first year of the introduction of carbon price and to use the carbon revenue to reduce production tax in following years.

Key Issues on Designing and Implementing Emissions Trading System in China

The mitigation of carbon emissions has been the subject of gradual policy development in the international community during recent years. China, as the world’s most populous and largest developing country, is a large greenhouse gas (GHG) emissions source that grows rapidly in line with its industrialisation and urbanisation. Extensive air pollution within China today, however, is endangering the lives of countless citizens and sapping the nation’s economic vitality. In response, the Chinese government is considering adopting appropriate environmental policy instruments to mitigate emissions, among which emissions trading system (ETS) is of great concern.This article firstly makes a brief introduction to the status quo of China’s emerging carbon market. In this context, two types of ETS are defined and a review of pilot programs on carbon emissions trading in part of China is provided. Before discussing the key elements on designing and implementing ETS in China, the methodology of a multi-criteria approach is explained in Section II, which is used to evaluate this market-based environmental policy instrument throughout the article. In order to develop a scientifically sound, economically rational and politically feasible ETS, key issues including the scope of cap’s coverage, cap setting, system’s point of regulation, allowance distribution methods as well as "cost-containment" mechanisms are identified and discussed in Section III. Finally, an outlook on ETS in China is provided as a brief conclusion on the basis of the above study.

Policy Implications for Carbon Trading Market Establishment in China in the 12th Five-Year Period

Based on the survey of international emissions trading system (ETS) and quantitative analysis, policy suggestions on establishing a carbon ETS in China are presented in this study. Sectors sensitive to carbon prices, e.g., the power generation sector and the iron and steel industry, are given priority to be covered by the ETS. Interregional carbon trading should be carried out as early as possible. The cap of the ETS should be based on China’s carbon intensity reduction target with the floor carbon price for the market being set in the beginning. Suggestions on the infrastructure of ETS are also proposed, including the national wide carbon account registration system and the legislation to national measuring, reporting, verification system building. CitationLi, J.-F., Y.-X. Zhang, X. Wang, et al., 2012: Policy implications for carbon trading market establishment in China in the 12th Five-Year period. Adv. Clim. Change Res., 3(3), doi: 10.3724/SP.J.1248.2012.00163.

The Exploration of Implementation of Emissions Trading System in China

This paper studies the route, steps and measures of the implementation of the emissions trading system in China. It combines desk research and case study. The desk research aims to explore the inherent discipline of emissions trading system, so as to disclose its nature and features while the case study involves the one-year field research conducted by the author, and provides the pilot emission systems in some provinces, together with the difficulties in its implementation. There are possibilities of comprehensive coverage of emission trading system, which can only be protected by a law relevant to environmental property protection (issued by the Standing Committee of National People’s Congress). And there is necessity for China to set up a quota system for different pollutions. After the initial allocation among provinces, the quota will be divided among enterprises, partial paid and partial for free, under the principle of “Giving priority to efficiency with due consideration to fairness”. It is useful to establish an efficient secondary market of emis-sion trading system.