IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v76y2026icp251-261.html

Effectiveness of market incentives in China’s National Emission Trading Scheme

Author

Listed:
  • Lyu, Chen
  • Wang, Ke
  • Shi, Xunpeng
  • Cai, Bofeng
  • Yan, Gang

Abstract

We provide the quantitative evaluation of the incentive structure of China National Emission Trading Scheme (CN ETS) by analyzing 2282 compliance firms and find that CN ETS provides economic incentives for emission abatement through trading profits but exhibits a Matthew effect, whereby firms with larger emission reductions achieve higher marginal profits. In the second compliance cycle, the market incentive effect improved, evidenced by an increase in trading profits per ton of emission reductions and a weaking of the Matthew effect. The benchmark allowance allocation has effectively encouraged low-emission-intensity coal-fired units while expediting the phase-out of high-emission intensity units. However, gas-fired units, despite their lowest emission intensity and high flexibility, receive weak incentives. Central state-owned enterprises and units with prior experience in China’s ETS pilots, exhibit lower trading participation. Enhancing allowances scarcity, implementing paid allowances, strengthening compliance enforcement and penalties, and increasing trading activity are suggested to improve the CN ETS.

Suggested Citation

  • Lyu, Chen & Wang, Ke & Shi, Xunpeng & Cai, Bofeng & Yan, Gang, 2026. "Effectiveness of market incentives in China’s National Emission Trading Scheme," Structural Change and Economic Dynamics, Elsevier, vol. 76(C), pages 251-261.
    • Handle: RePEc:eee:streco:v:76:y:2026:i:c:p:251-261
    DOI: 10.1016/j.strueco.2025.12.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X25002036
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2025.12.011?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

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:streco:v:76:y:2026:i:c:p:251-261. 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.

    We have no bibliographic references for this item. You can help adding them by using 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.elsevier.com/locate/inca/525148 .

    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.