IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v15y2023i7p6036-d1112301.html
   My bibliography  Save this article

A Comparative Analysis of Separate and Joint Environmental Rights Trading Markets in China

Author

Listed:
  • Tianyu Luo

    (Department of Environmental Science and Engineering, Fudan University, Shanghai 200438, China)

  • Hongmin Chen

    (Department of Environmental Science and Engineering, Fudan University, Shanghai 200438, China)

Abstract

The structuring of effective market-based environmental rights instruments can help to achieve energy efficiency and emission reduction goals while minimizing economic costs. As part of the global drive for sustainable development, pollution rights, carbon emission permits, and white certificates have become widely used as environmental rights trading schemes in many countries. However, interactions between environmental rights can create challenges. For instance, China has established a national carbon market, which it aims to connect with the energy consumption permit trading market. The effectiveness of separate and joint markets in achieving win-win outcomes is an area that requires further research. To address this question, we employed a mixed-integer linear programming model to simulate the potential incremental outputs and energy savings of 16 high-energy-consuming and high-emission industries in China from 2010 to 2019. Our findings indicate that the joint energy consumption permits and the carbon emission permits market yield the greatest economic benefits, but they lack a distinct advantage compared to the separate carbon market. Additionally, industries face less pressure to ensure energy savings in the joint market. The energy saving ratio of the joint market is 0.1% lower than that of the separate carbon market. We also found that the construction of a joint market will incur additional costs for firms and governments. Based on our benefit and cost analysis, we propose that governance subjects of pilot cities prioritize the establishment of the carbon market and not the rapid expansion of the pilot-level scope of energy consumption permits.

Suggested Citation

  • Tianyu Luo & Hongmin Chen, 2023. "A Comparative Analysis of Separate and Joint Environmental Rights Trading Markets in China," Sustainability, MDPI, vol. 15(7), pages 1-17, March.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:7:p:6036-:d:1112301
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/15/7/6036/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/15/7/6036/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Huifang Tian & John Whalley, 2009. "Level versus Equivalent Intensity Carbon Mitigation Commitments," NBER Working Papers 15370, National Bureau of Economic Research, Inc.
    2. C de Chaisemartin & X D’HaultfŒuille, 2018. "Fuzzy Differences-in-Differences," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 999-1028.
    3. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2014. "Potential gains from trading bad outputs: The case of U.S. electric power plants," Resource and Energy Economics, Elsevier, vol. 36(1), pages 99-112.
    4. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," Applied Energy, Elsevier, vol. 87(6), pages 1804-1814, June.
    5. Hirose, Kosuke & Matsumura, Toshihiro, 2020. "A comparison between emission intensity and emission cap regulations," Energy Policy, Elsevier, vol. 137(C).
    6. Jia, Zhijie & Lin, Boqiang, 2020. "Rethinking the choice of carbon tax and carbon trading in China," Technological Forecasting and Social Change, Elsevier, vol. 159(C).
    7. Zhang, Shengling & Wang, Yao & Hao, Yu & Liu, Zhiwei, 2021. "Shooting two hawks with one arrow: Could China's emission trading scheme promote green development efficiency and regional carbon equality?," Energy Economics, Elsevier, vol. 101(C).
    8. Che, Shuai & Wang, Jun, 2022. "Policy effectiveness of market-oriented energy reform: Experience from China energy-consumption permit trading scheme," Energy, Elsevier, vol. 261(PB).
    9. de Chaisemartin, Clement & D'Haultfoeuille, Xavier, 2014. "Fuzzy Changes-in Changes," CAGE Online Working Paper Series 184, Competitive Advantage in the Global Economy (CAGE).
    10. Zhang, Yanfang & Wei, Jinpeng & Gao, Qi & Shi, Xunpeng & Zhou, Dequn, 2022. "Coordination between the energy-consumption permit trading scheme and carbon emissions trading: Evidence from China," Energy Economics, Elsevier, vol. 116(C).
    11. Yi, Bo-Wen & Xu, Jin-Hua & Fan, Ying, 2019. "Coordination of policy goals between renewable portfolio standards and carbon caps: A quantitative assessment in China," Applied Energy, Elsevier, vol. 237(C), pages 25-35.
    12. Sorrell, Steve & Harrison, David & Radov, Daniel & Klevnas, Per & Foss, Andrew, 2009. "White certificate schemes: Economic analysis and interactions with the EU ETS," Energy Policy, Elsevier, vol. 37(1), pages 29-42, January.
    13. Sadayuki, Taisuke & Arimura, Toshi H., 2021. "Do regional emission trading schemes lead to carbon leakage within firms? Evidence from Japan," Energy Economics, Elsevier, vol. 104(C).
    14. Soleille, Sebastien, 2006. "Greenhouse gas emission trading schemes: a new tool for the environmental regulator's kit," Energy Policy, Elsevier, vol. 34(13), pages 1473-1477, September.
    15. Färe, Rolf & Grosskopf, Shawna & Pasurka,, Carl A., 2013. "Tradable permits and unrealized gains from trade," Energy Economics, Elsevier, vol. 40(C), pages 416-424.
    16. Bersani, Alberto M. & Falbo, Paolo & Mastroeni, Loretta, 2022. "Is the ETS an effective environmental policy? Undesired interaction between energy-mix, fuel-switch and electricity prices," Energy Economics, Elsevier, vol. 110(C).
    17. Wang, Yizhong & Hang, Ye & Wang, Qunwei, 2022. "Joint or separate? An economic-environmental comparison of energy-consuming and carbon emissions permits trading in China," Energy Economics, Elsevier, vol. 109(C).
    18. Themann, Michael & Koch, Nicolas, 2021. "Catching up and falling behind: Cross-country evidence on the impact of the EU ETS on firm productivity," Ruhr Economic Papers 904, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    19. Zhang, Yue-Jun & Cheng, Hao-Sen, 2021. "The impact mechanism of the ETS on CO2 emissions from the service sector: Evidence from Beijing and Shanghai," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Yanfang & Wei, Jinpeng & Gao, Qi & Shi, Xunpeng & Zhou, Dequn, 2022. "Coordination between the energy-consumption permit trading scheme and carbon emissions trading: Evidence from China," Energy Economics, Elsevier, vol. 116(C).
    2. Che, Shuai & Wang, Jun, 2022. "Policy effectiveness of market-oriented energy reform: Experience from China energy-consumption permit trading scheme," Energy, Elsevier, vol. 261(PB).
    3. Zhang, Yanfang & Gao, Qi & Wei, Jinpeng & Shi, Xunpeng & Zhou, Dequn, 2023. "Can China's energy-consumption permit trading scheme achieve the “Porter” effect? Evidence from an estimated DSGE model," Energy Policy, Elsevier, vol. 180(C).
    4. Zhang, Weijie & Zhang, Ning & Yu, Yanni, 2019. "Carbon mitigation effects and potential cost savings from carbon emissions trading in China's regional industry," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 1-11.
    5. Kai Hu & Dandan Li & Daqian Shi & Wenli Xu, 2023. "Environmental regulation and energy efficiency: evidence from daily penalty policy in China," Journal of Regulatory Economics, Springer, vol. 63(1), pages 1-29, April.
    6. Hu, Yucai & Li, Ranran & Du, Lei & Ren, Shenggang & Chevallier, Julien, 2022. "Could SO2 and CO2 emissions trading schemes achieve co-benefits of emissions reduction?," Energy Policy, Elsevier, vol. 170(C).
    7. Zhang, Weijie & Yu, Yanni & Liu, Qingjun, 2024. "Is single or synergistic environmental permit trading system more effective? A study based on Chinese industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).
    8. Liu, Li & Sheng, Jichuan, 2024. "Energy quota trading and energy vulnerability: China's energy quota trading pilot," Energy Policy, Elsevier, vol. 184(C).
    9. Ying Zhang & Yingli Huang, 2023. "Killing Two Birds with One Stone or Missing One of Them? The Synergistic Governance Effect of China’s Carbon Emissions Trading Scheme on Pollution Control and Carbon Emission Reduction," Sustainability, MDPI, vol. 15(13), pages 1-25, June.
    10. Cl'ement de Chaisemartin & Diego Ciccia Xavier D'Haultf{oe}uille & Felix Knau, 2024. "Two-way Fixed Effects and Differences-in-Differences Estimators in Heterogeneous Adoption Designs," Papers 2405.04465, arXiv.org, revised Nov 2024.
    11. de Chaisemartin, Clement & D'Haultfoeuille, Xavier, "undated". "Supplement to Fuzzy Differences-in-Differences," Economic Research Papers 270217, University of Warwick - Department of Economics.
    12. Catalina Amuedo-Dorantes & Neeraj Kaushal & Ashley N. Muchow, 2021. "Timing of social distancing policies and COVID-19 mortality: county-level evidence from the U.S," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(4), pages 1445-1472, October.
    13. Isabella Giorgetti & Matteo Picchio, 2021. "One billion euro programme for early childcare services in Italy," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 460-492, July.
    14. Sonia Bhalotra & Martin Karlsson & Therese Nilsson & Nina Schwarz, 2022. "Infant Health, Cognitive Performance, and Earnings: Evidence from Inception of the Welfare State in Sweden," The Review of Economics and Statistics, MIT Press, vol. 104(6), pages 1138-1156, November.
    15. Cantarella, Michele & Fraccaroli, Nicolò & Volpe, Roberto, 2024. "Does language prevent policy take-up? Evidence from the Italian Start-up Act," Research Policy, Elsevier, vol. 53(6).
    16. Dany Bahar & Andreas Hauptmann & Cem Özgüzel & Hillel Rapoport, 2019. "Migration and Post-Conflict Reconstruction: The Effect of Returning Refugees on Export Performance in the Former Yugoslavia," Working Papers 2019-12, CEPII research center.
    17. Wanlin Yu & Jinlong Luo, 2022. "Impact on Carbon Intensity of Carbon Emission Trading—Evidence from a Pilot Program in 281 Cities in China," IJERPH, MDPI, vol. 19(19), pages 1-19, September.
    18. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    19. Kao, Chiang & Hwang, Shiuh-Nan, 2023. "Separating the effect of undesirable outputs generation from the inefficiency of desirable outputs production in efficiency measurement," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1097-1102.
    20. Miranda, Bruno Varella & de Oliveira, Gustavo Magalhães, 2023. "Assessing the performance of voluntary environmental agreements under high monitoring costs: Evidence from the Brazilian Amazon," Ecological Economics, Elsevier, vol. 214(C).

    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:gam:jsusta:v:15:y:2023:i:7:p:6036-:d:1112301. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.