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Benchmark-based emission allocation in a cap-and-trade system

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  • Heleen Groenenberg
  • Kornelis Blok

Abstract

One of the important bottlenecks for the introduction of emission trading is how allowances should be distributed among the participants in a trading scheme. Both grandfathering on the basis of historic emissions and auctioning have important drawbacks. In this paper, we propose an allowance distribution rule based on benchmarking of production processes: each company's share in the total allowance is determined by its production level and a reference emission level per product. The scheme shows some important advantages compared to other schemes.

Suggested Citation

  • Heleen Groenenberg & Kornelis Blok, 2002. "Benchmark-based emission allocation in a cap-and-trade system," Climate Policy, Taylor & Francis Journals, vol. 2(1), pages 105-109, March.
    • Handle: RePEc:taf:tcpoxx:v:2:y:2002:i:1:p:105-109
    DOI: 10.3763/cpol.2002.0209
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    Cited by:

    1. Wen Jiang & Li Yuan & Lanjun Wu & Shiyue Guo, 2019. "Carbon emission reduction and profit distribution mechanism of construction supply chain with fairness concern and cap-and-trade," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-23, October.
    2. Zhou, P. & Wang, M., 2016. "Carbon dioxide emissions allocation: A review," Ecological Economics, Elsevier, vol. 125(C), pages 47-59.
    3. Tisdell, John, 2007. "Bringing biophysical models into the economic laboratory: An experimental analysis of sediment trading in Australia," Ecological Economics, Elsevier, vol. 60(3), pages 584-595, January.
    4. Wang, M. & Zhou, P., 2017. "Does emission permit allocation affect CO2 cost pass-through? A theoretical analysis," Energy Economics, Elsevier, vol. 66(C), pages 140-146.
    5. Chi, Yuan-ying & Zhao, Hao & Hu, Yu & Yuan, Yong-ke & Pang, Yue-xia, 2022. "The impact of allocation methods on carbon emission trading under electricity marketization reform in China: A system dynamics analysis," Energy, Elsevier, vol. 259(C).
    6. Rietbergen, Martijn G. & Blok, Kornelis, 2010. "Setting SMART targets for industrial energy use and industrial energy efficiency," Energy Policy, Elsevier, vol. 38(8), pages 4339-4354, August.
    7. Kampas, Athanasios & White, Ben, 2003. "Selecting permit allocation rules for agricultural pollution control: a bargaining solution," Ecological Economics, Elsevier, vol. 47(2-3), pages 135-147, December.
    8. Wang, M. & Zhou, P., 2022. "A two-step auction-refund allocation rule of CO2 emission permits," Energy Economics, Elsevier, vol. 113(C).
    9. Chen, Tze-Wei & Chou, Chang-Erh & Chang, Kuo-Chuang, 2001. "Linking CGE with Geographic Information System," Conference papers 330914, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Linghu, Dazhi & Wu, Xilin & Lai, Kee-Hung & Ye, Fei & Kumar, Ajay & Tan, Kim Hua, 2022. "Implementation strategy and emission reduction effectiveness of carbon cap-and-trade in heterogeneous enterprises," International Journal of Production Economics, Elsevier, vol. 248(C).
    11. Zhang, Ning & Wang, Shuo, 2024. "Can China's regional carbon market pilots improve power plants' energy efficiency?," Energy Economics, Elsevier, vol. 129(C).
    12. Anouliès, Lisa, 2017. "Heterogeneous firms and the environment: a cap-and-trade program," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 84-101.
    13. Zhang, Yue-Jun & Wang, Ao-Dong & Tan, Weiping, 2015. "The impact of China's carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises," Energy Policy, Elsevier, vol. 86(C), pages 176-185.
    14. Lyu, Chenyan, 2021. "Regional Carbon Markets in China: Cointegration and Heterogeneity," Working Papers 13-2021, Copenhagen Business School, Department of Economics.
    15. Rui, Zhaobiao & Peng, Weicai & Qin, Ximei & Wang, Jun, 2023. "Assessing carbon cap-and-trade policies on hybrid renewable energy investments: Implications for pricing and capacity decisions," Resources Policy, Elsevier, vol. 86(PA).
    16. Ma, Xiaochen & Pan, Yanchun & Zhang, Manzi & Ma, Jianhua & Yang, Wen, 2024. "Impact of carbon emission trading and renewable energy development policy on the sustainability of electricity market: A stackelberg game analysis," Energy Economics, Elsevier, vol. 129(C).
    17. Ian Mackenzie & Nick Hanley & Tatiana Kornienko, 2008. "The optimal initial allocation of pollution permits: a relative performance approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(3), pages 265-282, March.
    18. Li, Gao & Ruonan, Li & Yingdan, Mei & Xiaoli, Zhao, 2022. "Improve technical efficiency of China's coal-fired power enterprises: Taking a coal-fired-withdrawl context," Energy, Elsevier, vol. 252(C).
    19. Yang, Lisha & Li, Yutianhao & Liu, Hongxun, 2021. "Did carbon trade improve green production performance? Evidence from China," Energy Economics, Elsevier, vol. 96(C).
    20. Stephenson, Kurt & Bosch, Darrell J. & Groover, Gordon E., 2004. "Carbon Credit Potential From Intensive Rotational Grazing Under Carbon Credit Certification Protocols," 2004 Annual meeting, August 1-4, Denver, CO 20225, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Wen Jiang & Wenfei Lu & Qianwen Xu, 2019. "Profit Distribution Model for Construction Supply Chain with Cap-and-Trade Policy," Sustainability, MDPI, vol. 11(4), pages 1-24, February.

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