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The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China

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  • Lin, Boqiang
  • Jia, Zhijie

Abstract

Emission Trading Scheme (ETS) is one of the most effective measures of emission reduction. However, few literatures have focused on the impact of the industry coverage in ETS. This paper constructs a recursive dynamic Computable General Equilibrium (CGE) model to simulate the choice of the coverage industries in China’s national ETS in 2017, and explore the impacts of ETS and the most suitable coverage industry for China. The results show that CO2 emission will reach its peak and stabilize by 2030 to meet the goal of “Enhanced Actions on Climate Change: China's Intended Nationally Determined Contributions”. The cumulative CO2 emission will reduce to 12.05 Bt-CO2 in ETS market during 2017–2030. Moreover, commodity prices will increase from 0.12 to 1.64% in different coverage scenarios. Carbon price can be guaranteed within a reasonable range if the rational choice of the Carbon Rights (CR) suppliers and demanders in ETS market is made by the government. This paper suggests that the industry covered in China’s ETS could imitate the patterns of EU Emissions Trading System (period I and period II) and Midwest Greenhouse Gas Reduction Accord in the U.S., or seek another option to balance the demand and supply of CR in ETS market.

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  • Lin, Boqiang & Jia, Zhijie, 2017. "The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China," Applied Energy, Elsevier, vol. 205(C), pages 1512-1527.
    • Handle: RePEc:eee:appene:v:205:y:2017:i:c:p:1512-1527
    DOI: 10.1016/j.apenergy.2017.08.098
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