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Emissions trading systems and social equity: A CGE assessment for China

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  • Huang, Hai
  • Roland-Holst, David
  • Springer, Cecilia
  • Lin, Jiang
  • Cai, Wenjia
  • Wang, Can

Abstract

Carbon dioxide emissions trading systems (ETS) are an important market-based mitigation strategy and have been applied in many regions. This study evaluates the potential for a national ETS in China. Using a dynamic computable general equilibrium (CGE) model with detailed representations of economic activity, emissions, and income distribution, we examine alternative mitigation policies from now until 2050. Based on statistical and survey data, we disaggregate the labor and household sectors and simulate the impacts of ETS policies on the incomes of different household groups. We find that ETS has the potential to reconcile China’s goals for sustained, inclusive, and low-carbon economic growth. Results show some key findings. First, the number of unemployed people in energy-intensive industries such as coal and construction will continue to increase; by 2050, employment in the coal industry will decline by 75%. Second, if the scope of the carbon market extends to all industries in China, carbon market revenues will continue to increase, reaching a maximum of 2278 billion yuan ($336 billion) in 2042 to become the world's largest carbon market. Third, the distribution of benefits from the national ETS can help achieve greater social equity. By comparing different distribution policies, we find that the combination of targeted subsidies for unemployed coal workers and direct household subsidies based on proportional per capita will reduce the social income gap to the greatest extent compared with other scenarios. By 2050, this distribution policy will reduce the Gini coefficient in China by 10% compared to the Business as Usual (BAU) scenario.

Suggested Citation

  • Huang, Hai & Roland-Holst, David & Springer, Cecilia & Lin, Jiang & Cai, Wenjia & Wang, Can, 2019. "Emissions trading systems and social equity: A CGE assessment for China," Applied Energy, Elsevier, vol. 235(C), pages 1254-1265.
    • Handle: RePEc:eee:appene:v:235:y:2019:i:c:p:1254-1265
    DOI: 10.1016/j.apenergy.2018.11.056
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    3. Yidan Chen & Jiang Lin & David Roland-Holst & Xu Liu & Can Wang, 2023. "Declining Renewable Costs, Emissions Trading, and Economic Growth: China’s Power System at the Crossroads," Energies, MDPI, vol. 16(2), pages 1-14, January.
    4. Lee, Hwarang & Kang, Sung Won & Koo, Yoonmo, 2020. "A hybrid energy system model to evaluate the impact of climate policy on the manufacturing sector: Adoption of energy-efficient technologies and rebound effects," Energy, Elsevier, vol. 212(C).
    5. Liu, Xianmei & Peng, Rui & Bai, Caiquan & Chi, Yuanying & Liu, Yuxiang, 2023. "Economic cost, energy transition, and pollutant mitigation: The effect of China's different mitigation pathways toward carbon neutrality," Energy, Elsevier, vol. 275(C).
    6. An, Kangxin & Zhang, Shihui & Huang, Hai & Liu, Yuan & Cai, Wenjia & Wang, Can, 2021. "Socioeconomic impacts of household participation in emission trading scheme: A Computable General Equilibrium-based case study," Applied Energy, Elsevier, vol. 288(C).
    7. Mardones, Cristian & Ortega, José, 2021. "Are the emissions trading systems’ simulations generated with a computable general equilibrium model sensitive to the nested production structure?," Applied Energy, Elsevier, vol. 298(C).
    8. Pan, Yuling & Dong, Feng, 2022. "Design of energy use rights trading policy from the perspective of energy vulnerability," Energy Policy, Elsevier, vol. 160(C).
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    10. Wang, M. & Zhou, P., 2022. "A two-step auction-refund allocation rule of CO2 emission permits," Energy Economics, Elsevier, vol. 113(C).
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