IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v73y2018icp43-52.html
   My bibliography  Save this article

Towards a national ETS in China: Cap-setting and model mechanisms

Author

Listed:
  • Feng, Shenghao
  • Howes, Stephen
  • Liu, Yu
  • Zhang, Keyu
  • Yang, Jun

Abstract

China is moving from regional Emissions Trading Schemes (ETSs) to a nation-wide ETS. Although a larger ETS will be more efficient, the literature warns that it could make net permit selling regions worse off. We use a CGE model to simulate the linking of two provincial ETSs, namely those of Hubei and Guangdong. Our simulations suggest a trade-off between efficiency and equity as the richer regions (typified by Guangdong) will benefit from linking but the poorer regions (typified by Hubei) may lose. This is because poorer provinces in China tend to be more emissions intensive and therefore likely to face a carbon price rise upon linking, the costs of which may be only partially offset by trading, if indeed trading is permitted. We show this, and explain why it is the case by improving on the stylized model suggested by Adams and Parmenter (2013). Following Atkinson (1970), we find that worsened equity from linking may dominate improved efficiency, thus reducing aggregated welfare. We advise more generous caps to be given to more emissions intensive and less developed regions. If so, as suggest our simulation results, a Pareto-improvement could be attainable.

Suggested Citation

  • Feng, Shenghao & Howes, Stephen & Liu, Yu & Zhang, Keyu & Yang, Jun, 2018. "Towards a national ETS in China: Cap-setting and model mechanisms," Energy Economics, Elsevier, vol. 73(C), pages 43-52.
    • Handle: RePEc:eee:eneeco:v:73:y:2018:i:c:p:43-52
    DOI: 10.1016/j.eneco.2018.03.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988318300975
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2018.03.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wittwer, Glyn, 2022. "Preparing a multi-country, sub-national CGE model: EuroTERM including Ukraine," Conference papers 333470, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Chu, Baoju & Dong, Yizhe & Liu, Yaorong & Ma, Diandian & Wang, Tianju, 2024. "Does China's emission trading scheme affect corporate financial performance: Evidence from a quasi-natural experiment," Economic Modelling, Elsevier, vol. 132(C).
    3. Cui, Qi & He, Ling & Liu, Yu & Zheng, Yanting & Wei, Wei & Yang, Bo & Zhou, Meifang, 2021. "The impacts of COVID-19 pandemic on China’s transport sectors based on the CGE model coupled with a decomposition analysis approach," Transport Policy, Elsevier, vol. 103(C), pages 103-115.
    4. Zhang, Hongyu & Zhang, Da & Zhang, Xiliang, 2023. "The role of output-based emission trading system in the decarbonization of China's power sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 173(C).
    5. Qi, Shaozhou & Cheng, Shihan & Tan, Xiujie & Feng, Shenghao & Zhou, Qi, 2022. "Predicting China's carbon price based on a multi-scale integrated model," Applied Energy, Elsevier, vol. 324(C).
    6. Siriwardana, Mahinda & Nong, Duy, 2021. "Nationally Determined Contributions (NDCs) to decarbonise the world: A transitional impact evaluation," Energy Economics, Elsevier, vol. 97(C).
    7. Cui, Qi & Liu, Yu & Ali, Tariq & Gao, Ji & Chen, Hao, 2020. "Economic and climate impacts of reducing China's renewable electricity curtailment: A comparison between CGE models with alternative nesting structures of electricity," Energy Economics, Elsevier, vol. 91(C).

    More about this item

    Keywords

    ETS; Cap-setting; Equity; Welfare; China; CGE;
    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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:73:y:2018:i:c:p:43-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.