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Advancing the experiment to reality: Perspectives on Shanghai pilot carbon emissions trading scheme

Author

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  • Wu, Libo
  • Qian, Haoqi
  • Li, Jin

Abstract

Shanghai, as the most advanced mega city in China, has launched a pilot carbon emission trading scheme (SH-ETS) that is designed to achieve a compromise between the domestic context in Shanghai, and a need for national policy appeal. This paper gives an overview of the latest progress of the SH-ETS and sheds some light on the features of key design components, such as the threshold for inclusion, sector coverage, cap setting, allowance allocation and the Monitoring, Reporting and Verification (MRV) system. Based on a concern that manipulative principles and economic dynamics may lead to uncertainties and ultimately influence the emission reduction effect of the scheme, this paper conducts an evaluation of potential uncertainties, such as those caused by changes in patterns of economic growth, strategic trading activities related to the bankable allowances, carbon leakage risks and insufficient MRV capabilities. To advance the experiment to reality, this paper suggests some changes are made to the pilot, which include adjusting the allowance allocation principles to facilitate change in the domestic energy structure, improving the disclosure of emission data to guarantee information symmetry, gauging the carbon leakage risks to strengthen compliance, and introducing risk management for non-regulated players and derivatives products.

Suggested Citation

  • Wu, Libo & Qian, Haoqi & Li, Jin, 2014. "Advancing the experiment to reality: Perspectives on Shanghai pilot carbon emissions trading scheme," Energy Policy, Elsevier, vol. 75(C), pages 22-30.
  • Handle: RePEc:eee:enepol:v:75:y:2014:i:c:p:22-30
    DOI: 10.1016/j.enpol.2014.04.022
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    References listed on IDEAS

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    1. Zhang, Zhong Xiang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," International Review of Environmental and Resource Economics, now publishers, vol. 6(3), pages 225-287, December.
    2. Fell, Harrison & MacKenzie, Ian A. & Pizer, William A., 2012. "Prices versus quantities versus bankable quantities," Resource and Energy Economics, Elsevier, vol. 34(4), pages 607-623.
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    Cited by:

    1. Munnings, Clayton & Morgenstern, Richard D. & Wang, Zhongmin & Liu, Xu, 2016. "Assessing the design of three carbon trading pilot programs in China," Energy Policy, Elsevier, vol. 96(C), pages 688-699.
    2. Zhao, Xin-gang & Jiang, Gui-wu & Nie, Dan & Chen, Hao, 2016. "How to improve the market efficiency of carbon trading: A perspective of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1229-1245.
    3. Fang, Guochang & Tian, Lixin & Fu, Min & Sun, Mei & Du, Ruijin & Liu, Menghe, 2017. "Investigating carbon tax pilot in YRD urban agglomerations—Analysis of a novel ESER system with carbon tax constraints and its application," Applied Energy, Elsevier, vol. 194(C), pages 635-647.
    4. Mengfei Jiang & Xi Liang & David Reiner & Boqiang Lin & Maosheng Duan, 2018. "Stakeholder Views on Interactions between Low-carbon Policies and Carbon Markets in China: Lessons from the Guangdong ETS," Working Papers EPRG 1805, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. repec:eee:energy:v:172:y:2019:i:c:p:1198-1210 is not listed on IDEAS
    6. repec:eee:energy:v:164:y:2018:i:c:p:124-136 is not listed on IDEAS
    7. repec:eee:rensus:v:75:y:2017:i:c:p:855-867 is not listed on IDEAS
    8. repec:taf:tcpoxx:v:16:y:2016:i:7:p:815-835 is not listed on IDEAS
    9. Zhou, X. & Fan, L.W. & Zhou, P., 2015. "Marginal CO2 abatement costs: Findings from alternative shadow price estimates for Shanghai industrial sectors," Energy Policy, Elsevier, vol. 77(C), pages 109-117.
    10. Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2016. "Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings," Omega, Elsevier, vol. 63(C), pages 48-59.
    11. repec:eee:rensus:v:82:y:2018:i:p3:p:4121-4131 is not listed on IDEAS
    12. Munnings, Clayton & Acworth, William & Sartor, Oliver & Kim, Yong-Gun & Neuhoff, Karsten, 2016. "Pricing Carbon Consumption: A Review of an Emerging Trend," Discussion Papers dp-16-49, Resources For the Future.
    13. Munnings, Clayton & Morgenstern, Richard & Wang, Zhongmin & Liu, Xu, 2014. "Assessing the Design of Three Pilot Programs for Carbon Trading in China," Discussion Papers dp-14-36, Resources For the Future.
    14. Wu, Rui & Dai, Hancheng & Geng, Yong & Xie, Yang & Masui, Toshihiko & Tian, Xu, 2016. "Achieving China’s INDC through carbon cap-and-trade: Insights from Shanghai," Applied Energy, Elsevier, vol. 184(C), pages 1114-1122.
    15. Zhang, Yue-Jun & Peng, Yu-Lu & Ma, Chao-Qun & Shen, Bo, 2017. "Can environmental innovation facilitate carbon emissions reduction? Evidence from China," Energy Policy, Elsevier, vol. 100(C), pages 18-28.
    16. repec:eee:ecanpo:v:62:y:2019:i:c:p:175-186 is not listed on IDEAS
    17. Xiong, Ling & Shen, Bo & Qi, Shaozhou & Price, Lynn & Ye, Bin, 2017. "The allowance mechanism of China’s carbon trading pilots: A comparative analysis with schemes in EU and California," Applied Energy, Elsevier, vol. 185(P2), pages 1849-1859.
    18. repec:eee:eneeco:v:75:y:2018:i:c:p:249-260 is not listed on IDEAS
    19. repec:spr:annopr:v:255:y:2017:i:1:d:10.1007_s10479-016-2232-2 is not listed on IDEAS
    20. repec:gam:jeners:v:12:y:2019:i:9:p:1667-:d:227697 is not listed on IDEAS
    21. Jiang, Jingjing & Xie, Dejun & Ye, Bin & Shen, Bo & Chen, Zhanming, 2016. "Research on China’s cap-and-trade carbon emission trading scheme: Overview and outlook," Applied Energy, Elsevier, vol. 178(C), pages 902-917.
    22. Cong, Ren & Lo, Alex Y., 2017. "Emission trading and carbon market performance in Shenzhen, China," Applied Energy, Elsevier, vol. 193(C), pages 414-425.
    23. repec:gam:jsusta:v:10:y:2018:i:3:p:605-:d:133585 is not listed on IDEAS
    24. Wei Jiang & Jia Liu & Xiang Liu, 2016. "Impact of Carbon Quota Allocation Mechanism on Emissions Trading: An Agent-Based Simulation," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-13, August.

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