Emissions Trading Research Articles

The Impact of Green Finance Policies on Carbon Emission Trading

In the context of increasingly severe global climate change, the international community's demand for reducing greenhouse gas emissions is urgent. This paper explores the critical role of green finance policies in guiding capital flows to green and low-carbon areas. In order to achieve carbon reduction goals under the global climate change context. The main content of this paper includes how green finance, through green credit and green bonds, promotes the activity and efficiency of carbon emission trading, thus significantly affecting carbon emission intensity. Additionally, it details the policy background, development process, and challenges faced by the carbon emission trading system, including issues such as limited industry coverage and insufficient market liquidity. Finally, it proposes policy recommendations and future prospects, such as improving laws and regulations, promoting technological innovation, and expanding market coverage, and strengthening international cooperation to further optimize the carbon emission trading market and help achieve sustainable development goals.

Dynamic Relationship Between Environmental Policy and Technological Innovation: Evidence from Firms in Korean Emission Trading Scheme

To cope with radical global environmental regulation, it is necessary to find efficient ways to decrease carbon emissions with a low burden on firms and to design valid policies for a sustainable economy. This study investigates the link between the carbon emissions market and firms’ innovation activities and examines the impact of R&D investment caused by the carbon emissions market on the financial performance of firms participating in the Korean Emission Trading Scheme (KETS). This study assumes that a well-designed carbon emissions market can amplify the effect of R&D investment on improving the financial performance of firms and tests the efficiency of this market based on the KETS data. The results show that the indirect R&D elasticity that affects financial performance is simultaneously negative in the short and long run, except in Phase 1 (2015–2018). From this result, this study concludes that the carbon emissions market cannot induce technological innovation to increase financial performance in Korea, and the dynamic efficiency of the market is low. The industry comparison results confirm that the emissions market has a statistically significant effect on financial performance only in carbon-intensive industries. This study thus shows that the impact of technological innovation induced by the carbon emissions market varies depending on industrial characteristics.

Analyzing the Effectiveness of Carbon Pricing Instruments in Reducing Carbon Emissions in Major Asian Economies

Carbon Pricing Instruments (CPIs), such as Carbon Taxes and Emission Trading Schemes (ETSs), have been launched in several countries, primarily in Europe and North America, as a means of limiting the emissions of greenhouse gases (GHGs) which have been known to cause climate change. The adoption of these measures in Asia has been controversial, with many arguing that they would limit economic development in the region. We review the CPIs of 18 Asian economies, 7 of which have adopted a CPI during our review period from 1990 to 2021. We perform a comparative analysis of the economies in Asia, applying the Kaya Identity to decompose the variables affecting carbon emissions and the Nearest Neighbor Matching technique to compare the effect that CPIs have on countries adopting these policies relative to other jurisdictions. We found a positive and significant effect of CPIs on reducing carbon emissions in the Asian countries compared in our study. This offers crucial insights for policymakers, stressing the effectiveness of CPIs in balancing environmental sustainability with economic development in the region.

Carbon Transition Risk, Emissions Trading Schemes, and Firm Performance: International Evidence

ABSTRACTThis study investigates the impact of carbon transition risk and emissions trading schemes (ETSs) on the firm performance using a sample of 401,692 firm‐quarter observations from 64 countries and territories during the 2010–2019 period. Using the Paris Agreement 2015 as the quasi‐natural experiment, our difference‐in‐differences analysis provides robust evidence of carbon transition risk enhancing heavy polluter firms' performance in countries that implemented ETS, but it is not the case for their counterparts. Our findings suggest the importance of ETS implementation in the sustainable development and demonstrate strong heterogeneity in the impact of carbon transition risk on corporate outcomes.

A novel two-stage energy sharing method for data center cluster considering ‘Carbon-Green Certificate’ coupling mechanism

The energy consumption of data centers is on a sharp upward trend, and how to achieve joint optimal scheduling and energy management of multiple data centers is the key to the economic and low-carbon operation of data center prosumers (DCPs). This study introduces shared electric-hydrogen energy storage (SEHES) for DCPs, constructs a data center cluster (DCC) framework, and proposes a two-stage energy sharing model for DCC considering the ‘Carbon-Green Certificate’ coupling mechanism (C-GCCM). First, the DCC framework containing DCC operator (DCCO) and DCPs is established, and the C-GCCM based on conversion coefficients is designed to improve the energy saving and emission reduction level of DCC. In the day-ahead optimization stage, a stochastic multi-objective scheduling model for SEHES considering economy and environmental protection is developed. In the real-time optimization stage, considering the C-GCCM and the difference in on-grid prices, the Stackelberg game model of DCC is constructed according to the internal energy price set by DCCO and the trading strategies of DCPs. Finally, the proposed model is solved using the normal boundary intersection algorithm, the particle swarm algorithm and CPLEX. Simulation results demonstrate that the proposed DCC framework can reduce the daily operating cost of DCPs by 67.05%. The introduction of C-GCCM has resulted in a shift from negative to positive benefits on carbon emission trading for DCC and a 42.33% increase in benefits on green certificate trading.

Does China’s carbon emission trading scheme reduce CO[formula omitted] emissions? Comprehensive evaluation from synthetic control method using lasso

Although China’s carbon emissions trading scheme (ETS) serves as an effective and economically viable tool to mitigating carbon dioxide (CO2) emissions, challenges exists in accurately quantifying the ETS treatment effect. Focusing on improving the precision of evaluating the treatment effect, this study employs the synthetic control method using lasso (SCUL) to construct synthetic units for six pilot regions and makes a comparison with the synthetic control method (SCM). Based on seven predictor variables ranging from 2000 to 2017, we find that: (1) SCUL produces more accurate predictions than SCM before the intervention. SCUL generates synthetic CO2 emissions that seamlessly align with their actual counterparts throughout the pre-treatment period for six pilot regions. The average Cohen’s D values are notably lower than 0.25, standing at 0.052, 0.0314, 0.1501, 0.0412, 0.01, and 0.0346 for Beijing, Tianjing, Shanghai, Hubei, Guangdong, and Chongqing, respectively. In contrast, SCM achieves satisfactory pre-treatment fits only for Hubei, Guangdong, and Chongqing, exhibiting average Cohen’s D values of 0.2426, 0.1366, and 0.1624 respectively. (2) The in-place and in-time placebo tests implemented via SCUL both verifies the robustness of the results of SCUL. (3) SCUL and SCM yield similar results for Hubei, Guangdong, and Chongqing. This further supports the validity of SCUL’s conclusions. Additionally, SCUL offers insights into Beijing, Tianjin, and Shanghai that SCM fails to provide.

Systematic review of modelling techniques in carbon trading research in construction

Purpose Carbon emissions trading is an effective instrument in reducing greenhouse gas emissions. There is a notable scarcity of comprehensive reviews on the modelling techniques within carbon trading research in construction. Design/methodology/approach This paper reviews 68 relevant articles published in 19 peer-reviewed journals using systematic search. Scientometric analysis and content analysis are undertaken. Findings Generally, China was the largest contributor to carbon trading research using quantitative models (representing 36% of the total articles). From the results, the modelling techniques identified were multi-objective grasshopper optimisation algorithm; system dynamics; interpretive structural modelling; multi-agent-based model; decision-support model; multi-objective chaotic sine cosine algorithm; optimised backpropagation neural network; sequential panel selection method; Granger causality test; and impulse response analysis. Moreover, the advantages and disadvantages of these techniques were identified. System dynamics was recommended as the most suitable modelling technique for carbon trading in construction. Originality/value This study is significant, and through this review paper, practitioners can easily be more familiar with the significant modelling techniques, and this will motivate them to better understand their uses.

Climate policy and corporate green transformation: Empirical evidence from carbon emission trading

The implementation of climate policies in the financial sector is a global consensus among countries committed to sustainable development. Therefore, the impact of carbon trading policy (CTP) on firms’ green transformation (GT) is examined by manually compiling a directory of emission control enterprises in China’s carbon market from 2008 to 2022, using a difference-in-differences model. This topic must be urgently explored through theoretical and empirical studies. This study found that CTP can promote corporate green transformation; however has no industry and regional spillover effects. Mechanism analyses indicate that CTP can promote a firm’s green transformation by enhancing green innovation and environmental, social, and governance (ESG) performance. Heterogeneity analysis reveals that the effect of CTP on GT is effective when firms have higher “greenwash” scores, lower financialization, weaker product market competition, and higher levels of environmental regulation. This study reveals the microeconomic effects of CTP, and the findings provide empirical evidence that China can realize Porter’s hypothesis.

Carbon emission trading scheme, investors’ attention, and earnings response coefficients

This study explores how the introduction of the carbon emissions trading scheme (ETS) affects investors’ reactions to corporate earnings surprises. We propose two non-exclusive explanations, namely, the preference-based view and the uncertainty-based view, and suggest that the implementation of ETS may influence the magnitude of investor responses to corporate unexpected earnings. Consistent with the preference-based view, by utilizing China’s introduction of ETS as a quasi-natural experiment, we observe a reduction in the earnings response coefficients (ERCs) following the implementation of ETS. We validate this result by showing that the introduction of ETS prompts investors to focus on corporate carbon risk. Cross-sectional tests find that the effect of ETS on ERCs is more pronounced in firms with higher corporate carbon risk exposure, in firms whose investors exhibit greater environmental awareness, in better-developed carbon pilot markets, and in firms with greater exposure to international capital markets, while this impact is mitigated by firms’ non-financial performance. These findings highlight the importance of environmental regulation and market liberalization in influencing investors’ resource allocation.

A burden-sharing model shaping the embodied carbon emission and considering regions' efforts to reduce emissions in China's power sector

To achieve “carbon peaking and carbon neutrality”, reasonable burden-sharing for emission reductions among key players is critical. And reasonable burden-sharing requires scientific clarification of their actual emissions and responsibilities, and full accounting of efforts to reduce emissions. Therefore, this paper focuses on China's power industry and proposes a burden-sharing model that reflects regions' embodied carbon emissions and mitigation efforts. Moreover, considering the economic spillover effects of the power industry in different regions to re-define China's sub-regional emission reduction targets. Results show a significant difference in the flow of electricity embodied carbon among China's regions. The carbon embodied in the power industry increased by 948 million tonnes between 2012 and 2017, mainly due to changes in the structure of final demand and production. Furthermore, implementing the Emissions Trading System (ETS) has effectively curbed carbon emissions in seven pilot provinces and cities, namely Beijing, Tianjin, Shanghai, Guangdong, Hubei, Chongqing, and Fujian, especially Beijing. Spillover effects significantly impact the economic growth of provinces, and some provinces that have enjoyed the benefits of spillover effects should take more responsibility for emission reductions. In summary, each region has different allowances and it is suggested that differentiated policies should be implemented to promote regionally-ordered low-carbon development and achieve the dual-carbon goal.

Going with the Grain of the Landscape: rethinking our approach to environmental policy

There are doubts about whether the current approach to regulating the impacts of land use in rural Aotearoa is making a difference. This article starts by outlining four challenges policymakers face when designing policies to protect the environment while balancing social, cultural and economic interests. We then discuss some of the barriers landowners encounter when contemplating land use change to address environmental degradation. Finally, we sketch out an adaptive approach to rethinking how we do environmental policy, including by devolving some decision making to communities, providing better environmental information, being explicit about the costs and trade-offs, and reforming the New Zealand Emissions Trading Scheme.

The Spatial Spillover Effect and Mechanism of Carbon Emission Trading Policy on Pollution Reduction and Carbon Reduction: Evidence from the Pearl River–West River Economic Belt in China

Abstract: China faces issues such as air pollution and global climate change, and the Carbon Emission Trading Policy (CETP) has attracted considerable attention as a core policy tool for achieving the "dual carbon" goals. Based on panel data from the Pearl River–West River Economic Belt (PRWREB) from 2008 to 2021, we use the Synthetic Control Method (SCM) and Spatial Difference-in-Differences (S-DID) models to explore the pollution reduction and carbon reduction effects of the CETP and its spatial heterogeneity. Our analysis reveals several interesting insights. First, the CETP has promoted a 34.1% overall reduction in pollution and carbon levels in the pilot areas, with sustained effects. Moreover, spatial spillover effects can reduce the pollution and carbon levels in the economic belt by 29.9%. Second, the pollution and carbon reduction effects of the CETP are more significant in regions with better economic development and active carbon trading. It has the best synergistic reduction effects on CO2 and SO2 but is less effective in reducing PM2.5. Third, the spillover effects of the CETP on technological innovation are greater than the direct effects, with the most noticeable pollution and carbon reduction outcomes. The overall negative effect on industrial structure is that it fails to promote pollution and carbon reduction. The emission reduction mechanisms vary for different targets: CO2 and PM2.5 are related to energy efficiency, SO2 to advancing industrial structure, and smoke and dust to technological innovation. Based on the research conclusions, we propose to improve the coordinated governance system for carbon and pollution, advance pollution and carbon reduction according to local conditions, and implement targeted emission reduction and efficiency enhancement.

China environmental economics: A political authority approach and neo-marxist perspective in the emission trading system (ETS) implementation

The study focuses on the implementation of the Emissions Trading System (ETS) in China and its impact on the economy, using an environmental economic theory framework reinforced by the theory of political authority and neo-Marxist perspectives. The research find that The ETS policy has a long-term positive impact on the economy and the amount of carbon intensity. The Chinese government influence is very powerful and can ensure that all entities follow the rules of emissions trading, which facilitates policy enforcement. Emissions trading also provides an opportunity for the business world to invest and generate new ideas, which will produce better products in the future. The research argue that China is striving to align itself with global governance in order to secure its economic interests, employing a political authority approach as a component of the Marxist perspective. The study examines the decision-making process in choosing between the short-term and long-term impact on the Chinese economy following the implementation of the Emissions Trading System (ETS). The study uses qualitative research methodology, using secondary data from previous research.

Does Carbon Emission Trading Affect China’s Green Innovation? An Exploration from the Perspective of the Enterprise Lifecycle

Does Carbon Emission Trading Affect China’s Green Innovation? An Exploration from the Perspective of the Enterprise Lifecycle

The Role and Prospect of Emission Trading in the Optimal Allocation of Environmental Resources

The emission trading system is an important institutional innovation which effectively uses market mechanisms to improve the efficiency of environmental governance, and plays an important role in exploiting the potential of emission reduction for government and enterprise, which would realize the optimal allocation of environmental resources. The study analyses the design mechanism of emission trading system, the crucial parts including verification of emission rights, paid use for resources, emission trading, reserve and control mechanism, as well as management and incentive policies. Thereby, the current problems of emission trading system in China have been found out, including the deficiency of top-level design, ineffective cohesive mechanism between different systems, inactive trading market, and insufficient supporting policy guarantee policy. Based on the development trend of national policies and the practical problems faced by emission trading, the study proposes four prospects for the emission trading efforts. First, the issuance of guidance documents for deepening the emission trading system at the national level is an important foundation for the development of the emission trading system. Second, convergence between the emission rights trading and the emission permit system is the inevitable trend of the development of the system. Third, working on promoting the construction of a trading system dominated by market mechanisms is the focus of the optimal allocation of resources and environment. Last, establishing and improving relevant supporting mechanisms is an important guarantee for the stable development of the emission rights trading market and the efficient allocation of environmental resources.

Collaborative Optimization Scheduling of Source-Network-Load-Storage System Based on Ladder-Type Green Certificate–Carbon Joint Trading Mechanism and Integrated Demand Response

To fully leverage the potential flexibility resources of a source-network-load-storage (SNLS) system and achieve the green transformation of multi-source systems, this paper proposes an economic and low-carbon operation strategy for an SNLS system, considering the joint operation of ladder-type green certificate trading (GCT)–carbon emission trading (CET), and integrated demand response (IDR). Firstly, focusing on the load side of electricity–heat–cooling–gas multi-source coupling, this paper comprehensively considers three types of flexible loads: transferable, replaceable, and reducible. An IDR model is established to tap into the load-side scheduling potential. Secondly, improvements are made to the market mechanisms: as a result of the division into tiered intervals and introduction of reward–penalty coefficients, the traditional GCT mechanism was improved to a more constraining and flexible ladder-type GCT mechanism. Moreover, the carbon offset mechanism behind green certificates serves as a bridge, leading to a GCT-CET joint operation mechanism. Finally, an economic low-carbon operation model is formulated with the objective of minimizing the comprehensive cost consisting of GCT cost, CET cost, energy procurement cost, IDR cost, and system operation cost. Simulation results indicate that by effectively integrating market mechanisms and IDR, the system can enhance its capacity for renewable energy penetration, reduce carbon emissions, and achieve green and sustainable development.

Exploring the emission spillover effects in production networks under carbon trading market: Insights into complementary and competitive industries

As the division of labor deepens, carbon emissions may easily escape through the intertwined production network and well-connected market. As a result, the effectiveness of carbon trading market can no longer be evaluated solely for the regulated regions or industries. Their spillover effects along production networks are necessary for determining whether the policy simply cuts carbon emissions radically or just drives their transmission. To this end, we regarded the pilot carbon emission trading market (PET) in China, as a quasi-natural experiment and employed the multi-regional input-output model to depict the inter-industry linkages. Its spillover impacts on their complementary (including upstream and downstream) and competitive industries have been examined separately, along with the deep mechanism and its heterogeneous feature. Results show that the PET significantly suppresses carbon emissions in upstream industries, while promoting carbon emissions in competitive ones. Furthermore, the PET reduces emissions in upstream industries mainly by decreasing production scale and improving technological innovation. In contrast, the production scale of the downstream industry is not significantly affected, though its energy structure and carbon emission intensity have been improved to a certain extent. Worse still, competitive industries seize the market share of regulated industries and expand production, leading to an increase in carbon emissions.

Analysis of the Performance and Influencing Factors of China's Carbon Market in 2022

China's carbon market is pivotal in the global battle against climate change, especially as the world's largest emitter of greenhouse gases. The establishment and effective management of this market are critical for advancing global environmental sustainability. Central to this effort is the carbon trade price (CTP), widely recognized as a key indicator of market fluctuations. In 2022, China's carbon market experienced significant turmoil, contrasting sharply with the resilience of the European carbon market, which demonstrated steady demand and price growth. This article reviews existing literature on the factors influencing CTP, identifying crucial elements such as environmental conditions, policy frameworks, market dynamics, and economic indicators that shape China's Emissions Trading System (ETS). A detailed analysis of these factors for the years 2021 and 2022 is provided. Additionally, I propose further factors that may impact the CTP and offer a series of policy recommendations aimed at enhancing the effectiveness and stability of China's carbon market.

Interactions and distortions of different support policies for green hydrogen

This paper explores various policies to support climate-neutral hydrogen production, focusing on their interaction with energy markets and cap-and-trade systems such as the EU emission trading scheme. We develop and deploy a state-of-the-art equilibrium model to examine the effect of hydrogen support policies on the interactions between hydrogen, electricity and emission markets. Our analysis shows that mechanisms remunerating hydrogen production can distort spot prices of electricity and hydrogen more strongly than mechanisms that remunerate hydrogen production capacity. Hydrogen support mechanisms furthermore promote renewable electricity production and deter investment in conventional generation assets. The associated decrease in emissions in the power sector leads to an increase of emissions in the industrial and hydrogen sector due to the waterbed effect in the EU emission trading scheme. Our case study on an emission-capped area inspired by the EU shows that the operational distortions that production-based mechanisms exhibit, typically increase costs more than the investment distortions that capacity-based mechanisms entail.

Carbon Giants: Exploring the Top 100 Industrial CO2 Emitters in the EU

We analyze emissions and associated damages from the top 100 industrial CO2 emitters in the EU using data from the European Pollutant Release and Transfer Register, the EU Transaction Log, population grids, and regional information. These top emitters account for 19% of total EU CO2 emissions, 39% of industrial CO2 emissions, as well as a third of industrial SOx and NOx emissions, and a significant share of industrial PM10 emissions. In 2017, monetized damages of hazardous co-pollutants range from 20 to 67 billion Euros, and combined co-pollutant and climate damages amount to between 92 and 260 billion Euros. The top 100 alone would exhaust the EU’s carbon budget in a few decades. The joint climate and co-pollutant damages of a significant number of the top 100 exceed the economic value generated by the entire industry sector in their respective regions, indicating substantial underregulation. Yet the top 100 received free EU Emissions Trading System permits for 27% of their carbon emissions. Many top emitters are located in densely populated regions, with 3.1% of EU’s population living within 10 kilometers of a Carbon Giant. Our analysis reveals the critical importance of addressing major emitters in research and policymaking.