IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v41y2020i2p123-142.html
   My bibliography  Save this article

Identifying Strategic Traders in China’s Pilot Carbon Emissions Trading Scheme

Author

Listed:
  • Lei Zhu
  • Xu Wang
  • Dayong Zhang

Abstract

This paper uses a sample of 1,867 firms that participate in the “Top-10,000 Energy-Consuming Enterprises Program†in China and aims to identify strategic traders in its pilot emissions trading scheme. Firms included in the ETS can exert their market power and manipulate allowance prices to achieve low compliance costs, which will consequently influence the effectiveness of this platform. This is of great importance to regulators or designers of this system in identifying these strategic traders and understanding their impact. We follow the basic principle proposed by Godal (2005) and develop a simple and implementable empirical procedure to study firm-level data from seven pilot programs in China. The results show that strategic traders exist with clear regional and sectoral differences. As a consequence of strategic trading by these firms, the overall volume of trading falls remarkably, with a clear increase in total compliance costs.

Suggested Citation

  • Lei Zhu & Xu Wang & Dayong Zhang, 2020. "Identifying Strategic Traders in China’s Pilot Carbon Emissions Trading Scheme," The Energy Journal, , vol. 41(2), pages 123-142, March.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:2:p:123-142
    DOI: 10.5547/01956574.41.2.lzhu
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.41.2.lzhu
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.41.2.lzhu?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
    ---><---

    References listed on IDEAS

    as
    1. Wang, Xu & Zhang, Xiao-Bing & Zhu, Lei, 2019. "Imperfect market, emissions trading scheme, and technology adoption: A case study of an energy-intensive sector," Energy Economics, Elsevier, vol. 81(C), pages 142-158.
    2. Chunbo Ma and Atakelty Hailu, 2016. "The Marginal Abatement Cost of Carbon Emissions in China," The Energy Journal, International Association for Energy Economics, vol. 0(China Spe).
    3. Elaine F. Frey, 2013. "Technology Diffusion and Environmental Regulation: The Adoption of Scrubbers by Coal-Fired Power Plants," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    4. 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.
    5. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October.
    6. 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.
    7. repec:dau:papers:123456789/10174 is not listed on IDEAS
    8. R. Andrew Muller & Stuart Mestelman, 1994. "Emission Trading with Shares and Coupons: A Laboratory Experiment," The Energy Journal, , vol. 15(2), pages 185-211, April.
    9. Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, vol. 25(5), pages 527-551, September.
    10. Stephen P. Holland, Jonathan E. Hughes, Christopher R. Knittel, Nathan C. Parker, 2015. "Unintended Consequences of Carbon Policies: Transportation Fuels, Land-Use, Emissions, and Innovation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    11. Du, Kerui & Lu, Huang & Yu, Kun, 2014. "Sources of the potential CO2 emission reduction in China: A nonparametric metafrontier approach," Applied Energy, Elsevier, vol. 115(C), pages 491-501.
    12. Eirik S. Amundsen and Lars Bergman, 2012. "Green Certificates and Market Power on the Nordic Power Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    13. Joshua Linn, 2008. "Technological Modifications in the Nitrogen Oxides Tradable Permit Program," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 153-176.
    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. Wang, Xu & Wen, Ziyu & He, Lingyun & Zheng, Haoyang & Yang, Tengfei & Long, Ruyin, 2024. "The role of imperfect market structure in the employment effect of emissions trading scheme in China: A theoretical extension and empirical investigation," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 920-937.

    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. 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.
    2. Dai, Hancheng & Xie, Yang & Liu, Jingyu & Masui, Toshihiko, 2018. "Aligning renewable energy targets with carbon emissions trading to achieve China's INDCs: A general equilibrium assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 4121-4131.
    3. Tang, Ling & Wu, Jiaqian & Yu, Lean & Bao, Qin, 2017. "Carbon allowance auction design of China's emissions trading scheme: A multi-agent-based approach," Energy Policy, Elsevier, vol. 102(C), pages 30-40.
    4. Lu, Yunguo & Zhang, Lin, 2022. "National mitigation policy and the competitiveness of Chinese firms," Energy Economics, Elsevier, vol. 109(C).
    5. Chen, Zhenling & Yuan, Xiao-Chen & Zhang, Xiaoling & Cao, Yunfei, 2020. "How will the Chinese national carbon emissions trading scheme work? The assessment of regional potential gains," Energy Policy, Elsevier, vol. 137(C).
    6. Fraas, Art & Kopits, Elizabeth & Wolverton, Ann, 2021. "A Retrospective Review of Retrospective Cost Analyses," National Center for Environmental Economics-NCEE Working Papers 348923, United States Environmental Protection Agency (EPA).
    7. Chang-Jing Ji & Xiao-Yi Li & Yu-Jie Hu & Xiang-Yu Wang & Bao-Jun Tang, 2019. "Research on carbon price in emissions trading scheme: a bibliometric analysis," 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. 99(3), pages 1381-1396, December.
    8. 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.
    9. Yi-Hua Wu & Hancheng Dai & Yang Xie & Toshihiko Masui, 2019. "The efforts of Taiwan to achieve NDC target: an integrated assessment on the carbon emission trading system," 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. 99(3), pages 1295-1310, December.
    10. Chang-Jing Ji & Yu-Jie Hu & Bao-Jun Tang, 2018. "Research on carbon market price mechanism and influencing factors: a literature review," 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. 92(2), pages 761-782, June.
    11. Bingxin Zeng & Lei Zhu, 2019. "Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme," Sustainability, MDPI, vol. 11(14), pages 1-18, July.
    12. 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.
    13. 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.
    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. Tsung-Chen Lee, 2011. "Endogenous market structures in non-cooperative international emissions trading," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 16(6), pages 663-675, August.
    16. Zhang, Cheng & Wang, Qunwei & Shi, Dan & Li, Pengfei & Cai, Wanhuan, 2016. "Scenario-based potential effects of carbon trading in China: An integrated approach," Applied Energy, Elsevier, vol. 182(C), pages 177-190.
    17. Chen, Xing & Lin, Boqiang, 2021. "Towards carbon neutrality by implementing carbon emissions trading scheme: Policy evaluation in China," Energy Policy, Elsevier, vol. 157(C).
    18. Godal Odd & Meland Frode, 2010. "Permit Markets, Seller Cartels and the Impact of Strategic Buyers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, April.
    19. Zhang, Yue-Jun & Liang, Ting & Jin, Yan-Lin & Shen, Bo, 2020. "The impact of carbon trading on economic output and carbon emissions reduction in China’s industrial sectors," Applied Energy, Elsevier, vol. 260(C).
    20. Haiyan Shan & Junliang Yang & Guo Wei, 2019. "Industrial Symbiosis Systems: Promoting Carbon Emission Reduction Activities," IJERPH, MDPI, vol. 16(7), pages 1-23, March.

    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:sae:enejou:v:41:y:2020:i:2:p:123-142. 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: SAGE Publications (email available below). General contact details of provider: .

    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.