Dynamic centralized resource allocation approach with contextual impacts: analyzing Chinese carbon allocation plans

Setting carbon abatement quota is a strategy to abate carbon emissions. Practically, the allocation mechanism of carbon abatement quota is always formulated and implemented as a dynamic process, affected by the outside production environment. Such formulations have seldom been addressed in the literature. Unlike existing studies, this study proposes a novel DEA allocation model to measure centralized resource allocation in a dynamic process, and the model is in a multiplier form, which reflects the impact of allocation on the technology frontier. Meanwhile, contextual impacts are also incorporated into the dynamic allocation model. Empirically, the carbon allocation of China’s industrial systems is examined at macro and micro levels. From a dynamic perspective, diverse carbon abatement amounts and carbon intensities are identified for the industrial producers in allocation. We find that the dynamic modeling has affected the annual carbon allocation results, and observe that contextual impacts smooth the annual changes in carbon abatement amounts. Additionally, contextual factors adjust the industrial carbon abatement tasks by transferring some abatement burden from the eastern and western areas to the central area, and from small and micro firms to large and medium firms. Besides, contextual factors affect the robustness of the allocation measurement, by reducing the gaps of allocation results among DMUs, making the allocation results less stable corresponding to upper bound changes.