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Crossing the river by feeling the stones: the case of carbon trading in China

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  • ZhongXiang Zhang

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Abstract

Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and is opt for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme. Copyright Society for Environmental Economics and Policy Studies and Springer Japan 2015

Suggested Citation

  • ZhongXiang Zhang, 2015. "Crossing the river by feeling the stones: the case of carbon trading in China," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 263-297, April.
  • Handle: RePEc:spr:envpol:v:17:y:2015:i:2:p:263-297
    DOI: 10.1007/s10018-015-0104-7
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    References listed on IDEAS

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    1. repec:eee:transe:v:104:y:2017:i:c:p:52-68 is not listed on IDEAS
    2. repec:cup:endeec:v:22:y:2017:i:06:p:725-746_00 is not listed on IDEAS
    3. repec:spr:envpol:v:19:y:2017:i:4:d:10.1007_s10018-016-0171-4 is not listed on IDEAS
    4. Zhang, Zengkai & Zhang, Zhongxiang, 2017. "Intermediate input linkage and carbon leakage," Environment and Development Economics, Cambridge University Press, vol. 22(06), pages 725-746, December.
    5. repec:eee:enepol:v:107:y:2017:i:c:p:669-677 is not listed on IDEAS
    6. Cong, Ren & Lo, Alex Y., 2017. "Emission trading and carbon market performance in Shenzhen, China," Applied Energy, Elsevier, vol. 193(C), pages 414-425.

    More about this item

    Keywords

    Pilot carbon trading schemes; Low-carbon development; Environmental taxes; Market stabilization mechanism; Carbon offsets; Enforcement and compliance; China; H23; O13; P28; Q43; Q48; Q52; Q54; Q58;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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