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Linking Emissions Trading Schemes: Economic Valuation of a Joint China–Japan–Korea Carbon Market

Author

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  • Zhongyu Ma

    (State Information Center, Beijing 100045, China)

  • Songfeng Cai

    (State Information Center, Beijing 100045, China)

  • Weifeng Ye

    (College of Earth and Environmental Sciences, Lanzhou University, Lanzhou 730000, China)

  • Alun Gu

    (Institute of Energy, Environment and Economy, Tsinghua University, Beijing 100084, China)

Abstract

Linking carbon emissions trading systems across countries has become an important tool for global emission reduction. The three high-emission Asian countries, China, Japan, and South Korea (ROK), all have initiated carbon trading and published ambitious Intended Nationally Determined Contribution targets. Since 2016, the three countries have discussed establishing a long-term unified market for carbon emissions trading, and have sought a scheme for such exchange. This study aimed to investigate whether linking the carbon emissions trading systems of these three countries could potentially achieve more ambitious emission reduction targets. A dynamic energy-environmental version of the Global Trade Analysis Project model was used to simulate carbon market linkages across the three countries. The results indicated that a linked China–Japan–ROK carbon market would be highly cost-effective, have positive economic benefits for all three countries, and improve the carbon market’s liquidity and transaction scale. Under a scenario with no carbon market linking, the economic losses in China, Japan, and ROK would be $51.55 billion, $13.55 billion, and $74.19 billion, respectively. Meanwhile, with carbon trading linking, the losses would be reduced to $47.08 billion, $5.37 billion, and $9.10 billion, respectively. Therefore, a joint China–Japan–ROK carbon market could greatly promote the adoption of market-based tools for emission reduction.

Suggested Citation

  • Zhongyu Ma & Songfeng Cai & Weifeng Ye & Alun Gu, 2019. "Linking Emissions Trading Schemes: Economic Valuation of a Joint China–Japan–Korea Carbon Market," Sustainability, MDPI, vol. 11(19), pages 1-12, September.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5303-:d:270868
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    2. Laura Rodríguez-Fernández & Ana Belén Fernández Carvajal & María Bujidos-Casado, 2020. "Allocation of Greenhouse Gas Emissions Using the Fairness Principle: A Multi-Country Analysis," Sustainability, MDPI, vol. 12(14), pages 1-15, July.
    3. Fang, Chenhao & Ma, Tieju, 2020. "Stylized agent-based modeling on linking emission trading systems and its implications for China's practice," Energy Economics, Elsevier, vol. 92(C).
    4. Shen, Jun & Tang, Pengcheng & Zeng, Hao & Cheng, Jinhua & Liu, Xiuli, 2023. "Does emission trading system reduce mining cities’ pollution emissions? A quasi-natural experiment based on Chinese prefecture-level cities," Resources Policy, Elsevier, vol. 81(C).
    5. Siriwardana, Mahinda & Nong, Duy, 2021. "Nationally Determined Contributions (NDCs) to decarbonise the world: A transitional impact evaluation," Energy Economics, Elsevier, vol. 97(C).

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