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Plant-Level Evaluation Of China’S National Emissions Trading Scheme: Benchmark Matters

Author

Listed:
  • RONG MA

    (School of Economics, Fudan University, Guoquan Road 600#, Shanghai 200433, P. R. China)

  • HAOQI QIAN

    (��Institute for Global Public Policy, Fudan University, Handan Road 220#, Shanghai 200433, P. R. China‡LSE-Fudan Research Centre for Global Public Policy, Fudan University, Handan Road 220#, Shanghai 200433, P. R. China§Shanghai Institute for Energy and Carbon Neutrality Strategy, Fudan University, Handan Road 220#, Shanghai 200433, P. R. China)

Abstract

China’s national emission trading scheme (ETS) started operating in 2021 after four years of preparation. In the initial stage of national ETS, benchmarking approach is one of the hottest topics that have gained sufficient attention. For the reason that benchmarks will greatly affect the permits allocation results and thus affect the effectiveness of the carbon market. This paper attempts to investigate the impacts of the benchmark designs of China’s ETS by using plant-level data. Main results show that the current lax benchmark standards adopted by the national ETS will lead to excess surplus of permits. The whole carbon market will achieve market clearance only when the benchmark standards are set as high as the top 2% efficiency levels. If the carbon price is 200yuan/ton, the annual trading volume will be 16.4 billion yuan and 13.2 billion yuan in extra will be spent on carbon offsetting for compliance. If the auction mechanism is introduced, the total market size will significantly increase. The auction revenue will exceed 300 billion yuan when 50% of permits are allocated through auction and will exceed 600 billion yuan when all permits are auctioned. These revenues can provide sufficient funds to accelerate China’s low-carbon transformation as well as improve social welfare.

Suggested Citation

  • Rong Ma & Haoqi Qian, 2022. "Plant-Level Evaluation Of China’S National Emissions Trading Scheme: Benchmark Matters," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 1-25, February.
    • Handle: RePEc:wsi:ccexxx:v:13:y:2022:i:01:n:s2010007822400097
    DOI: 10.1142/S2010007822400097
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    Cited by:

    1. Shuyang Chen & Mingyu Li & Can Wang, 2023. "The primary benefits of the Nationwide Emission Trading Scheme in China," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 28(8), pages 1-17, December.

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