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Approaches to carbon allowance allocation in China: a computable general equilibrium analysis

Author

Listed:
  • Yun-Fei Yao

    (Sinopec
    Beijing Institute of Technology)

  • Qiao-Mei Liang

    () (Beijing Institute of Technology
    Beijing Institute of Technology
    Collaborative Innovation Center of Electric Vehicles in Beijing)

Abstract

China is preparing to develop and implement an emissions trading system in its 13th five-year plan. Allowance allocation is one of the key issues to settle during the establishment of this system. This study applies the China Energy and Environmental Policy Analysis model to assess how the allowances should be allocated. Simulation results show that, while impacts on China’s economic development vary according to how allowances are allocated, the negative impacts cannot be mitigated completely, which are between −0.5 and −0.1 % when 5 % of carbon emissions are reduced. In terms of the impacts on the macroeconomy, sectoral output, and capital revenue, results suggest that auctioning the allowances and recycling the revenue to reduce the indirect tax will perform best in alleviating the negative impacts. Meanwhile, impacts of carbon mitigation on international competitiveness can be reduced most in the approach where only key energy- and trade-intensive sectors are able to receive free allowances. However, if citizens’ welfare and quality of life is prioritized, auctioning the allowance and transferring the revenue to households in proportion to their occupation will be the most effective approach; in this case, the negative impacts on rural households’ disposable incomes and welfare will be reduced, and the income gap between rural and urban households will be narrowed.

Suggested Citation

  • Yun-Fei Yao & Qiao-Mei Liang, 2016. "Approaches to carbon allowance allocation in China: a computable general equilibrium 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. 84(1), pages 333-351, November.
  • Handle: RePEc:spr:nathaz:v:84:y:2016:i:1:d:10.1007_s11069-016-2352-7
    DOI: 10.1007/s11069-016-2352-7
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    References listed on IDEAS

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    Cited by:

    1. 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, Open Access Journal, vol. 10(8), pages 1-16, July.

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