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New market mechanism and its implication for carbon reduction in China


  • Gao, Shuai
  • Smits, Mattijs
  • Mol, Arthur P.J.
  • Wang, Can


This article presents a detailed review and analysis of the discussions around the new market mechanism (NMM) and explores its potential in China. It contributes to the current discussion of the NMM in three aspects. First, this article attempts to streamline ideas about the NMM. The term NMM is considered to be an umbrella concept for emission trading systems which all Parties can engage in on a voluntary basis in the implementation of their intended nationally determined contributions, and which need to satisfy three criteria: (i) having a large scale scope; (ii) aiming to facilitate a net emission reduction; (iii) allowing flexibility for the host country. We also present a framework to clarify the NMM. Based on this framework, major options with a high implementation potential are identified. Second, we argue that the national-level operational framework determines the chance of successful implementation of the NMM. We identify different options based on a literature survey and evaluate them with respect to effectiveness and efficiency. Third, we choose China, a highly influential country regarding climate change polices, as a case to analyze the potential contributions and challenges of the NMM and its implementation at different stages of national development.

Suggested Citation

  • Gao, Shuai & Smits, Mattijs & Mol, Arthur P.J. & Wang, Can, 2016. "New market mechanism and its implication for carbon reduction in China," Energy Policy, Elsevier, vol. 98(C), pages 221-231.
  • Handle: RePEc:eee:enepol:v:98:y:2016:i:c:p:221-231
    DOI: 10.1016/j.enpol.2016.08.036

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    References listed on IDEAS

    1. de Perthuis, Christian & Trotignon, Raphael, 2014. "Governance of CO2 markets: Lessons from the EU ETS," Energy Policy, Elsevier, vol. 75(C), pages 100-106.
    2. Marcu, Andrei, 2014. "The Framework for Various Approaches and the New Market Mechanism," CEPS Papers 9694, Centre for European Policy Studies.
    3. 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.
    4. Cai, Wenjia & Wang, Can & Chen, Jining & Wang, Siqiang, 2012. "Sectoral crediting mechanism: How far China has to go," Energy Policy, Elsevier, vol. 48(C), pages 770-778.
    5. repec:dau:papers:123456789/13539 is not listed on IDEAS
    6. Zhang, Da & Karplus, Valerie J. & Cassisa, Cyril & Zhang, Xiliang, 2014. "Emissions trading in China: Progress and prospects," Energy Policy, Elsevier, vol. 75(C), pages 9-16.
    7. Xiao, He & Wei, Qingpeng & Wang, Hailin, 2014. "Marginal abatement cost and carbon reduction potential outlook of key energy efficiency technologies in China׳s building sector to 2030," Energy Policy, Elsevier, vol. 69(C), pages 92-105.
    8. Can Wang & Yuan Yang & Junjie Zhang, 2015. "China's sectoral strategies in energy conservation and carbon mitigation," Climate Policy, Taylor & Francis Journals, vol. 15(sup1), pages 60-80, December.
    9. Qi, Shaozhou & Wang, Banban & Zhang, Jihong, 2014. "Policy design of the Hubei ETS pilot in China," Energy Policy, Elsevier, vol. 75(C), pages 31-38.
    10. Li, Yuan & Zhu, Lei, 2014. "Cost of energy saving and CO2 emissions reduction in China’s iron and steel sector," Applied Energy, Elsevier, vol. 130(C), pages 603-616.
    11. Zhang, Yurong & Wang, Yuanfeng, 2013. "Barriers' and policies' analysis of China's building energy efficiency," Energy Policy, Elsevier, vol. 62(C), pages 768-773.
    12. Flues, Florens & Löschel, Andreas & Lutz, Benjamin Johannes & Schenker, Oliver, 2014. "Designing an EU energy and climate policy portfolio for 2030: Implications of overlapping regulation under different levels of electricity demand," Energy Policy, Elsevier, vol. 75(C), pages 91-99.
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