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Going to the Source: Using an Upstream Point of Regulation for Energy in a National Chinese Emissions Trading System

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  • Suzi Kerr
  • Vicki Duscha

Abstract

There are many choices within the design of an emissions trading system. In this paper we focus on one specific aspect – the point of regulation for the energy sector. This choice affects transaction costs; comprehensiveness, and hence the amount of emissions covered and the extent to which the potential cost-effectiveness gains are realised; and credibility of the system. We discuss how an ‘upstream’ energy sector emissions trading system works and present arguments for going upstream (in particular, simplicity of administration) while also discussing arguments for other points of regulation in the light of Chinese circumstances. We further present experiences with the New Zealand system, the only system that is entirely upstream for energy, showing ways to address issues that may arise with an upstream system. Ultimately the success of emissions trading depends on flexible markets that operate in a relatively free and competitive way. Simply copying others' systems in the context of a largely controlled economy such as the Chinese one is likely to be ineffective; each system must be uniquely tailored to local circumstances, possibly in China more than ever before.

Suggested Citation

  • Suzi Kerr & Vicki Duscha, 2014. "Going to the Source: Using an Upstream Point of Regulation for Energy in a National Chinese Emissions Trading System," Energy & Environment, , vol. 25(3-4), pages 593-611, April.
    • Handle: RePEc:sae:engenv:v:25:y:2014:i:3-4:p:593-611
    DOI: 10.1260/0958-305X.25.3-4.593
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    Cited by:

    1. Fergus Green & Richard Denniss, 2018. "Cutting with both arms of the scissors: the economic and political case for restrictive supply-side climate policies," Climatic Change, Springer, vol. 150(1), pages 73-87, September.
    2. Wang, Xu & Zhu, Lei & Fan, Ying, 2018. "Transaction costs, market structure and efficient coverage of emissions trading scheme: A microlevel study from the pilots in China," Applied Energy, Elsevier, vol. 220(C), pages 657-671.
    3. Jessica Coria & Jūratė Jaraitė, 2019. "Transaction Costs of Upstream Versus Downstream Pricing of $$\hbox {CO}_{2}$$ CO 2 Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 965-1001, April.
    4. Coria, Jessica & Jaraite, Jurate, 2015. "Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes," Working Papers in Economics 609, University of Gothenburg, Department of Economics.
    5. Catherine Leining & Corey Allan & Suzi Kerr, 2017. "Evolution of the New Zealand Emissions Trading Scheme: Sectoral Coverage and Point of Obligation," Working Papers 17_05, Motu Economic and Public Policy Research.

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    More about this item

    Keywords

    Emission trading scheme; point of regulation; upstream; China; New Zealand;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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