Carbon emission trading system of China: A linked market vs. separated markets

Yu Liu; Shenghao Feng; Songfeng Cai; Yaxiong Zhang; Xiang Zhou; Yanbin Chen; Zhanming Chen

doi:10.1007/s11707-013-0385-8

Carbon emission trading system of China: A linked market vs. separated markets

Yu Liu^*, Shenghao Feng, Songfeng Cai, Yaxiong Zhang, Xiang Zhou, Yanbin Chen, Zhanming Chen

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

26 Citations (Scopus)

Abstract

The Chinese government intends to upgrade its current provincial carbon emission trading pilots to a nationwide scheme by 2015. This study investigates two of scenarios: separated provincial markets and a linked inter-provincial market. The carbon abatement effects of separated and linked markets are compared using two pilot provinces of Hubei and Guangdong based on a computable general equilibrium model termed Sino-TERMCo2. Simulation results show that the linked market can improve social welfare and reduce carbon emission intensity for the nation as well as for the Hubei-Guangdong bloc compared to the separated market. However, the combined system also distributes welfare more unevenly and thus increases social inequity. On the policy ground, the current results suggest that a well-constructed, nationwide carbon market complemented with adequate welfare transfer policies can be employed to replace the current top-down abatement target disaggregation practice.

Original language	English
Pages (from-to)	465-479
Number of pages	15
Journal	Frontiers of Earth Science
Volume	7
Issue number	4
DOIs	https://doi.org/10.1007/s11707-013-0385-8
Publication status	Published - Dec 2013

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T2 - A linked market vs. separated markets

AU - Liu, Yu

AU - Feng, Shenghao

AU - Cai, Songfeng

AU - Zhang, Yaxiong

AU - Zhou, Xiang

AU - Chen, Yanbin

AU - Chen, Zhanming

PY - 2013/12

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AB - The Chinese government intends to upgrade its current provincial carbon emission trading pilots to a nationwide scheme by 2015. This study investigates two of scenarios: separated provincial markets and a linked inter-provincial market. The carbon abatement effects of separated and linked markets are compared using two pilot provinces of Hubei and Guangdong based on a computable general equilibrium model termed Sino-TERMCo2. Simulation results show that the linked market can improve social welfare and reduce carbon emission intensity for the nation as well as for the Hubei-Guangdong bloc compared to the separated market. However, the combined system also distributes welfare more unevenly and thus increases social inequity. On the policy ground, the current results suggest that a well-constructed, nationwide carbon market complemented with adequate welfare transfer policies can be employed to replace the current top-down abatement target disaggregation practice.

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Carbon emission trading system of China: A linked market vs. separated markets

Abstract

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