Carbon quota allocation mechanisms considering infrastructure-based marginal emission reduction costs: A case study of China

Achieving society-wide carbon reduction targets often requires first allocating carbon quotas to various sub-units, such as sectors. Existing studies rarely incorporate infrastructure-based carbon marginal abatement cost into the allocation process, which is a key indicator for quantitatively assessing the cost and potential of emission reductions linked to energy system structure and technology. Introducing infrastructure-based marginal abatement cost into quota allocation can help enhance the economic efficiency of allocation. Therefore, this study proposes two quota allocation mechanisms based on infrastructure-based marginal abatement cost that can handle positive and negative quotas simultaneously. Using China as a case study and employing a sectoral-based optimisation planning model, this study allocates carbon quotas and designs emission reduction pathways for major energy-consuming sectors towards achieving 2060 net-zero emissions. The study also assesses the impact of different quota allocation mechanisms on emission reduction path planning. Results reveal that the choice of carbon quota mechanism significantly influences the configuration of low-carbon technologies and transition costs. By considering marginal abatement cost during allocation, more quotas are allocated to transport and building sectors, especially after 2030, reducing national transition costs by 31–61 %. Moreover, the country can even gain a positive net benefit of 8.5 trillion Yuan from the transition.