IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v113y2016icp1125-1135.html
   My bibliography  Save this article

Emissions reduction allocation and economic welfare estimation through interregional emissions trading in China: Evidence from efficiency and equity

Author

Listed:
  • Chang, Kai
  • Zhang, Chao
  • Chang, Hao

Abstract

Establishing an equal and effective emissions trading system is a long-term strategy to promote sustainable environmental protection and stronger economic growth. Due to regional divergences in economic development, resource endowment and geographical CO2 emissions space, this paper focuses on a comprehensive emissions reduction allocation solution based on the Shapley value method and estimating economic welfare effects through interregional emissions trading in China. Our empirical results verify that the Shapley value-based allocation criterion is an equal and effective emissions reduction target allocation. The Eastern and Southern coast, and the Northeastern and Middle Yellow River regions are the main emissions permit buyers, and they incur windfall economic losses because of greater marginal abatement cost, while the Southwest, Northwest, Northern coast and Middle Yangtze River regions are the main emissions permit sellers, and they earn windfall economic benefits because of the emissions reduction potential of energy-intensive industries.

Suggested Citation

  • Chang, Kai & Zhang, Chao & Chang, Hao, 2016. "Emissions reduction allocation and economic welfare estimation through interregional emissions trading in China: Evidence from efficiency and equity," Energy, Elsevier, vol. 113(C), pages 1125-1135.
    • Handle: RePEc:eee:energy:v:113:y:2016:i:c:p:1125-1135
    DOI: 10.1016/j.energy.2016.07.113
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544216310374
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2016.07.113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dan Wei & Adam Rose, 2009. "Interregional Sharing of Energy Conservation Targets in China: Efficiency and Equity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 81-112.
    2. Irina Dolgopolova & Bo Hu & Armin Leopold & Stefan Pickl, 2014. "Economic, institutional and technological uncertainties of emissions trading—a system dynamics modeling approach," Climatic Change, Springer, vol. 124(3), pages 663-676, June.
    3. Meunier, Guy & Ponssard, Jean-Pierre & Quirion, Philippe, 2014. "Carbon leakage and capacity-based allocations: Is the EU right?," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 262-279.
    4. Bréchet, Thierry & Lambrecht, Stéphane & Prieur, Fabien, 2009. "Intertemporal transfers of emission quotas in climate policies," Economic Modelling, Elsevier, vol. 26(1), pages 126-134, January.
    5. Chan, Hei Sing (Ron) & Li, Shanjun & Zhang, Fan, 2013. "Firm competitiveness and the European Union emissions trading scheme," Energy Policy, Elsevier, vol. 63(C), pages 1056-1064.
    6. Golombek, Rolf & Kittelsen, Sverre A.C. & Rosendahl, Knut Einar, 2013. "Price and welfare effects of emission quota allocation," Energy Economics, Elsevier, vol. 36(C), pages 568-580.
    7. Stephen Smith & Joseph Swierzbinski, 2007. "Assessing the performance of the UK Emissions Trading Scheme," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 131-158, May.
    8. Yu, Shiwei & Wei, Yi-Ming & Wang, Ke, 2014. "Provincial allocation of carbon emission reduction targets in China: An approach based on improved fuzzy cluster and Shapley value decomposition," Energy Policy, Elsevier, vol. 66(C), pages 630-644.
    9. van Asselt, Harro & Brewer, Thomas, 2010. "Addressing competitiveness and leakage concerns in climate policy: An analysis of border adjustment measures in the US and the EU," Energy Policy, Elsevier, vol. 38(1), pages 42-51, January.
    10. Claudia Kemfert & Michael Kohlhaas & Truong Truong & Artem Protsenko, 2006. "The environmental and economic effects of European emissions trading," Climate Policy, Taylor & Francis Journals, vol. 6(4), pages 441-455, July.
    11. Ralf Martin & Mirabelle Mu?ls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," American Economic Review, American Economic Association, vol. 104(8), pages 2482-2508, August.
    12. Rousse, Olivier, 2008. "Environmental and economic benefits resulting from citizens' participation in CO2 emissions trading: An efficient alternative solution to the voluntary compensation of CO2 emissions," Energy Policy, Elsevier, vol. 36(1), pages 388-397, January.
    13. Park, Hojeong & Hong, Won Kyung, 2014. "Korea׳s emission trading scheme and policy design issues to achieve market-efficiency and abatement targets," Energy Policy, Elsevier, vol. 75(C), pages 73-83.
    14. Böhringer, Christoph & Carbone, Jared C. & Rutherford, Thomas F., 2012. "Unilateral climate policy design: Efficiency and equity implications of alternative instruments to reduce carbon leakage," Energy Economics, Elsevier, vol. 34(S2), pages 208-217.
    15. Demailly, Damien & Quirion, Philippe, 2008. "European Emission Trading Scheme and competitiveness: A case study on the iron and steel industry," Energy Economics, Elsevier, vol. 30(4), pages 2009-2027, July.
    16. Zhu, Y. & Li, Y.P. & Huang, G.H. & Fan, Y.R. & Nie, S., 2015. "A dynamic model to optimize municipal electric power systems by considering carbon emission trading under uncertainty," Energy, Elsevier, vol. 88(C), pages 636-649.
    17. Cong, Rong-Gang & Wei, Yi-Ming, 2010. "Potential impact of (CET) carbon emissions trading on China’s power sector: A perspective from different allowance allocation options," Energy, Elsevier, vol. 35(9), pages 3921-3931.
    18. Caparrós, Alejandro & Péreau, Jean-Christophe & Tazdaït, Tarik, 2013. "Emission trading and international competition: The impact of labor market rigidity on technology adoption and output," Energy Policy, Elsevier, vol. 55(C), pages 36-43.
    19. Cui, Lian-Biao & Fan, Ying & Zhu, Lei & Bi, Qing-Hua, 2014. "How will the emissions trading scheme save cost for achieving China’s 2020 carbon intensity reduction target?," Applied Energy, Elsevier, vol. 136(C), pages 1043-1052.
    20. Meleo, Linda, 2014. "On the determinants of industrial competitiveness: The European Union emission trading scheme and the Italian paper industry," Energy Policy, Elsevier, vol. 74(C), pages 535-546.
    21. Yi, Wen-Jing & Zou, Le-Le & Guo, Jie & Wang, Kai & Wei, Yi-Ming, 2011. "How can China reach its CO2 intensity reduction targets by 2020? A regional allocation based on equity and development," Energy Policy, Elsevier, vol. 39(5), pages 2407-2415, May.
    22. Michael R. Raupach & Steven J. Davis & Glen P. Peters & Robbie M. Andrew & Josep G. Canadell & Philippe Ciais & Pierre Friedlingstein & Frank Jotzo & Detlef P. van Vuuren & Corinne Le Quéré, 2014. "Sharing a quota on cumulative carbon emissions," Nature Climate Change, Nature, vol. 4(10), pages 873-879, October.
    23. Clò, Stefano, 2010. "Grandfathering, auctioning and Carbon Leakage: Assessing the inconsistencies of the new ETS Directive," Energy Policy, Elsevier, vol. 38(5), pages 2420-2430, May.
    24. Lund, Peter, 2007. "Impacts of EU carbon emission trade directive on energy-intensive industries -- Indicative micro-economic analyses," Ecological Economics, Elsevier, vol. 63(4), pages 799-806, September.
    25. Chintamani Jog & Georgia Kosmopoulou, 2014. "Experimental evidence on the performance of emission trading schemes in the presence of an active secondary market," Applied Economics, Taylor & Francis Journals, vol. 46(5), pages 527-538, February.
    26. Schleich, Joachim & Rogge, Karoline S. & Betz, Regina, 2008. "Incentives for energy efficiency in the EU Emissions Trading Scheme," Working Papers "Sustainability and Innovation" S2/2008, Fraunhofer Institute for Systems and Innovation Research (ISI).
    27. Zhang, Yue-Jun & Wang, Ao-Dong & Da, Ya-Bin, 2014. "Regional allocation of carbon emission quotas in China: Evidence from the Shapley value method," Energy Policy, Elsevier, vol. 74(C), pages 454-464.
    28. Wang, Peng & Dai, Han-cheng & Ren, Song-yan & Zhao, Dai-qing & Masui, Toshihiko, 2015. "Achieving Copenhagen target through carbon emission trading: Economic impacts assessment in Guangdong Province of China," Energy, Elsevier, vol. 79(C), pages 212-227.
    29. Chang, Kai & Chang, Hao, 2016. "Cutting CO2 intensity targets of interprovincial emissions trading in China," Applied Energy, Elsevier, vol. 163(C), pages 211-221.
    30. Schmidt, Robert C. & Heitzig, Jobst, 2014. "Carbon leakage: Grandfathering as an incentive device to avert firm relocation," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 209-223.
    31. Akın Olçum, Gökçe & Yeldan, Erinç, 2013. "Economic impact assessment of Turkey's post-Kyoto vision on emission trading," Energy Policy, Elsevier, vol. 60(C), pages 764-774.
    32. Li, Ye & Wang, Yan-zhang & Cui, Qiang, 2016. "Has airline efficiency affected by the inclusion of aviation into European Union Emission Trading Scheme? Evidences from 22 airlines during 2008–2012," Energy, Elsevier, vol. 96(C), pages 8-22.
    33. Phylipsen, G J M & Bode, J W & Blok, K & Merkus, H & Metz, B, 1998. "A Triptych sectoral approach to burden differentiation; GHG emissions in the European bubble," Energy Policy, Elsevier, vol. 26(12), pages 929-943, October.
    34. Chicco, Gianfranco & Stephenson, Paule M., 2012. "Effectiveness of setting cumulative carbon dioxide emissions reduction targets," Energy, Elsevier, vol. 42(1), pages 19-31.
    35. Xin Tian & Miao Chang & Hiroki Tanikawa & Feng Shi & Hidefumi Imura, 2012. "Regional Disparity in Carbon Dioxide Emissions," Journal of Industrial Ecology, Yale University, vol. 16(4), pages 612-622, August.
    36. Qi, Tianyu & Winchester, Niven & Karplus, Valerie J. & Zhang, Xiliang, 2014. "Will economic restructuring in China reduce trade-embodied CO2 emissions?," Energy Economics, Elsevier, vol. 42(C), pages 204-212.
    37. N. Anger & B. Brouns & J. Onigkeit, 2009. "Linking the EU emissions trading scheme: economic implications of allowance allocation and global carbon constraints," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 379-398, June.
    38. Yu, Shiwei & Wei, Yi-Ming & Fan, Jingli & Zhang, Xian & Wang, Ke, 2012. "Exploring the regional characteristics of inter-provincial CO2 emissions in China: An improved fuzzy clustering analysis based on particle swarm optimization," Applied Energy, Elsevier, vol. 92(C), pages 552-562.
    39. Zhou, P. & Zhang, L. & Zhou, D.Q. & Xia, W.J., 2013. "Modeling economic performance of interprovincial CO2 emission reduction quota trading in China," Applied Energy, Elsevier, vol. 112(C), pages 1518-1528.
    40. Pan, Xunzhang & Teng, Fei & Wang, Gehua, 2014. "Sharing emission space at an equitable basis: Allocation scheme based on the equal cumulative emission per capita principle," Applied Energy, Elsevier, vol. 113(C), pages 1810-1818.
    41. Tsai, Wen-Hsien & Lee, Kuen-Chang & Liu, Jau-Yang & Lin, Hsiu-Ling & Chou, Yu-Wei & Lin, Sin-Jin, 2012. "A mixed activity-based costing decision model for green airline fleet planning under the constraints of the European Union Emissions Trading Scheme," Energy, Elsevier, vol. 39(1), pages 218-226.
    42. Gambhir, Ajay & Napp, Tamaryn A. & Emmott, Christopher J.M. & Anandarajah, Gabrial, 2014. "India's CO2 emissions pathways to 2050: Energy system, economic and fossil fuel impacts with and without carbon permit trading," Energy, Elsevier, vol. 77(C), pages 791-801.
    43. Wei, Chu & Ni, Jinlan & Du, Limin, 2012. "Regional allocation of carbon dioxide abatement in China," China Economic Review, Elsevier, vol. 23(3), pages 552-565.
    44. Gupta, Sujata & M Bhandari, Preety, 1999. "An effective allocation criterion for CO2 emissions," Energy Policy, Elsevier, vol. 27(12), pages 727-736, November.
    45. Lennox, James A. & van Nieuwkoop, Renger, 2010. "Output-based allocations and revenue recycling: Implications for the New Zealand Emissions Trading Scheme," Energy Policy, Elsevier, vol. 38(12), pages 7861-7872, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiangyue Joy Ying & Benjamin K. Sovacool, 2021. "A fair trade? Expert perceptions of equity, innovation, and public awareness in China’s future Emissions Trading Scheme," Climatic Change, Springer, vol. 164(3), pages 1-23, February.
    2. Woo, C.K. & Shiu, A. & Liu, Y. & Luo, X. & Zarnikau, J., 2018. "Consumption effects of an electricity decarbonization policy: Hong Kong," Energy, Elsevier, vol. 144(C), pages 887-902.
    3. Chang, Kai & Ye, Zhifang & Wang, Weihong, 2019. "Volatility spillover effect and dynamic correlation between regional emissions allowances and fossil energy markets: New evidence from China’s emissions trading scheme pilots," Energy, Elsevier, vol. 185(C), pages 1314-1324.
    4. Chiu-Ming Hsiao, 2022. "Economic Growth, CO 2 Emissions Quota and Optimal Allocation under Uncertainty," Sustainability, MDPI, vol. 14(14), pages 1-26, July.
    5. Chang, Kai & Ge, Fangping & Zhang, Chao & Wang, Weihong, 2018. "The dynamic linkage effect between energy and emissions allowances price for regional emissions trading scheme pilots in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 415-425.
    6. Yu, Fan & Xiao, De & Chang, Meng-Shiuh, 2021. "The impact of carbon emission trading schemes on urban-rural income inequality in China: A multi-period difference-in-differences method," Energy Policy, Elsevier, vol. 159(C).
    7. Lin, Boqiang & Jia, Zhijie, 2017. "The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China," Applied Energy, Elsevier, vol. 205(C), pages 1512-1527.
    8. Tang, Ling & Wang, Haohan & Li, Ling & Yang, Kaitong & Mi, Zhifu, 2020. "Quantitative models in emission trading system research: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    9. Fang, Guochang & Tian, Lixin & Fu, Min & Sun, Mei & He, Yu & Lu, Longxi, 2018. "How to promote the development of energy-saving and emission-reduction with changing economic growth rate—A case study of China," Energy, Elsevier, vol. 143(C), pages 732-745.
    10. Han, Rong & Li, Jianglong & Guo, Zhi, 2022. "Optimal quota in China's energy capping policy in 2030 with renewable targets and sectoral heterogeneity," Energy, Elsevier, vol. 239(PA).
    11. Wu, Jianxin & Ma, Chunbo & Tang, Kai, 2019. "The static and dynamic heterogeneity and determinants of marginal abatement cost of CO2 emissions in Chinese cities," Energy, Elsevier, vol. 178(C), pages 685-694.
    12. Lin, Boqiang & Jia, Zhijie, 2019. "Impacts of carbon price level in carbon emission trading market," Applied Energy, Elsevier, vol. 239(C), pages 157-170.
    13. Jia, Zhijie & Lin, Boqiang, 2020. "Rethinking the choice of carbon tax and carbon trading in China," Technological Forecasting and Social Change, Elsevier, vol. 159(C).
    14. Baochen Yang & Chuanze Liu & Yunpeng Su & Xin Jing, 2017. "The Allocation of Carbon Intensity Reduction Target by 2020 among Industrial Sectors in China," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    15. Fei Ye & Lixu Li & Zhiqiang Wang & Yina Li, 2018. "An Asymmetric Nash Bargaining Model for Carbon Emission Quota Allocation among Industries: Evidence from Guangdong Province, China," Sustainability, MDPI, vol. 10(11), pages 1-18, November.
    16. Lin, Boqiang & Jia, Zhijie, 2018. "Impact of quota decline scheme of emission trading in China: A dynamic recursive CGE model," Energy, Elsevier, vol. 149(C), pages 190-203.
    17. Zhang, Lirong & Li, Yakun & Jia, Zhijie, 2018. "Impact of carbon allowance allocation on power industry in China’s carbon trading market: Computable general equilibrium based analysis," Applied Energy, Elsevier, vol. 229(C), pages 814-827.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Kai & Chang, Hao, 2016. "Cutting CO2 intensity targets of interprovincial emissions trading in China," Applied Energy, Elsevier, vol. 163(C), pages 211-221.
    2. Zhou, P. & Wang, M., 2016. "Carbon dioxide emissions allocation: A review," Ecological Economics, Elsevier, vol. 125(C), pages 47-59.
    3. 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.
    4. Zhu, Bangzhu & Jiang, Mingxing & He, Kaijian & Chevallier, Julien & Xie, Rui, 2018. "Allocating CO2 allowances to emitters in China: A multi-objective decision approach," Energy Policy, Elsevier, vol. 121(C), pages 441-451.
    5. Zhang, Yue-Jun & Wang, Ao-Dong & Da, Ya-Bin, 2014. "Regional allocation of carbon emission quotas in China: Evidence from the Shapley value method," Energy Policy, Elsevier, vol. 74(C), pages 454-464.
    6. Shaofu Du & Jun Qian & Tianzhuo Liu & Li Hu, 2020. "Emission allowance allocation mechanism design: a low-carbon operations perspective," Annals of Operations Research, Springer, vol. 291(1), pages 247-280, August.
    7. Zhang, Yue-Jun & Wang, Ao-Dong & Tan, Weiping, 2015. "The impact of China's carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises," Energy Policy, Elsevier, vol. 86(C), pages 176-185.
    8. Feng, Zhiying & Tang, Wenhu & Niu, Zhewen & Wu, Qinghua, 2018. "Bi-level allocation of carbon emission permits based on clustering analysis and weighted voting: A case study in China," Applied Energy, Elsevier, vol. 228(C), pages 1122-1135.
    9. Yang, Lin & Li, Fengyu & Zhang, Xian, 2016. "Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China," Energy Policy, Elsevier, vol. 98(C), pages 254-265.
    10. Baochen Yang & Chuanze Liu & Yunpeng Su & Xin Jing, 2017. "The Allocation of Carbon Intensity Reduction Target by 2020 among Industrial Sectors in China," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    11. Yue-Jun Zhang & Jun-Fang Hao, 2015. "The allocation of carbon emission intensity reduction target by 2020 among provinces in China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(2), pages 921-937, November.
    12. Tang, Ling & Wu, Jiaqian & Yu, Lean & Bao, Qin, 2015. "Carbon emissions trading scheme exploration in China: A multi-agent-based model," Energy Policy, Elsevier, vol. 81(C), pages 152-169.
    13. Yanbin Li & Zhen Li & Min Wu & Feng Zhang & Gejirifu De, 2018. "Regional-Level Allocation of CO 2 Emission Permits in China: Evidence from the Boltzmann Distribution Method," Sustainability, MDPI, vol. 10(8), pages 1-16, July.
    14. Minxing Jiang & Bangzhu Zhu & Julien Chevallier & Rui Xie, 2018. "Allocating provincial CO2 quotas for the Chinese national carbon program," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(3), pages 457-479, July.
    15. Tang, Ling & Shi, Jiarui & Bao, Qin, 2016. "Designing an emissions trading scheme for China with a dynamic computable general equilibrium model," Energy Policy, Elsevier, vol. 97(C), pages 507-520.
    16. Martin, Ralf & Muûls, Mirabelle & de Preux, Laure B. & Wagner, Ulrich J., 2014. "On the empirical content of carbon leakage criteria in the EU Emissions Trading Scheme," Ecological Economics, Elsevier, vol. 105(C), pages 78-88.
    17. Frédéric Branger & Misato Sato, 2017. "Solving the clinker dilemma with hybrid output-based allocation," Climatic Change, Springer, vol. 140(3), pages 483-501, February.
    18. Zhang, Weijie & Zhang, Ning & Yu, Yanni, 2019. "Carbon mitigation effects and potential cost savings from carbon emissions trading in China's regional industry," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 1-11.
    19. 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.
    20. Fang, Kai & Zhang, Qifeng & Long, Yin & Yoshida, Yoshikuni & Sun, Lu & Zhang, Haoran & Dou, Yi & Li, Shuai, 2019. "How can China achieve its Intended Nationally Determined Contributions by 2030? A multi-criteria allocation of China’s carbon emission allowance," Applied Energy, Elsevier, vol. 241(C), pages 380-389.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:113:y:2016:i:c:p:1125-1135. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.