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A dynamic and continuous allowances allocation methodology for the prevention of carbon leakage: Emission control coefficients

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  • Sun, YongPing
  • Xue, JinJun
  • Shi, XunPeng
  • Wang, KeYing
  • Qi, ShaoZhou
  • Wang, Lei
  • Wang, Cheng

Abstract

Carbon leakage has become the core issue of emission trading systems. Using data from Hubei Province, this paper identifies the drawbacks of the prevailing methods for preventing carbon leakage and proposes a new methodology to overcome them, namely, Emission Control Coefficients. In contrast to the common tiered structure method, the Emission Control Coefficients generate a dynamic and continuous emission control coefficient for each industry which will improve the effectiveness and fairness of allowance allocation, set aside sufficient time for the low carbon transformation of industries, and balance the needs to protect competitiveness and decarbonize and are particularly suitable for the emission trading systems of developing counties. This paper makes three main academic contributions: Firstly, it proposes a new indicator, the abatement potential for more effective determining allowance allocation than the prevailing method. Secondly, it better distinguishes industrial differences. Thirdly, it can better respond to the problem of excess allowances that is due to technological advances and trade pattern changes.

Suggested Citation

  • Sun, YongPing & Xue, JinJun & Shi, XunPeng & Wang, KeYing & Qi, ShaoZhou & Wang, Lei & Wang, Cheng, 2019. "A dynamic and continuous allowances allocation methodology for the prevention of carbon leakage: Emission control coefficients," Applied Energy, Elsevier, vol. 236(C), pages 220-230.
    • Handle: RePEc:eee:appene:v:236:y:2019:i:c:p:220-230
    DOI: 10.1016/j.apenergy.2018.11.095
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    10. J. G. Fournier Gabela & F. Freund, 2023. "Potential carbon leakage risk: a cross-sector cross-country assessment in the OECD area," Climatic Change, Springer, vol. 176(5), pages 1-21, May.
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    More about this item

    Keywords

    Emissions trading system; Competitiveness; Carbon leakage; Allowance allocations; Developing countries;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • 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
    • F18 - International Economics - - Trade - - - Trade and Environment

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