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Carbon pass-through in Chinese cement industry

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  • Liu, S.Y.
  • Wang, M.
  • Zhou, P.

Abstract

This paper examines the carbon pass-through rate (CPTR) in Chinese cement industry using a rich dataset of daily data from the first trading day to December 2022. By using the Autoregressive distributed lag approach, we estimate the long-run effects of carbon costs on cement prices in five Chinese pilot carbon markets. We also control for the possible impact of the COVID-2019 epidemic and the de-capacity policies to ensure the robustness of empirical results. It has been found that downstream consumers bear more than half of the carbon emissions costs, with the magnitude of the pass-through rate differing significantly across regions. In particular, the CPTR in Beijing is almost 100 %, suggesting a high-level of windfall profits from free emission permits. Our study provides important implications for policy makers, including the need to consider reducing free allocation of permits for the cement industry given their high level of carbon pass-through, and provide different level of supports in different regions to balance the regional cement industry competitiveness.

Suggested Citation

  • Liu, S.Y. & Wang, M. & Zhou, P., 2025. "Carbon pass-through in Chinese cement industry," Energy Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:eneeco:v:144:y:2025:i:c:s0140988325002373
    DOI: 10.1016/j.eneco.2025.108413
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