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Plant-Level Evaluation Of China’S National Emissions Trading Scheme: Benchmark Matters

In: ASIAN MITIGATION Insights, Mitigation Actions, Strategies and Policies for Asian Economies

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  • RONG MA
  • HAOQI QIAN

Abstract

China’s national emission trading scheme (ETS) started operating in 2021 after four years of preparation. In the initial stage of national ETS, benchmarking approach is one of the hottest topics that have gained sufficient attention. For the reason that benchmarks will greatly affect the permits allocation results and thus affect the effectiveness of the carbon market. This paper attempts to investigate the impacts of the benchmark designs of China’s ETS by using plant-level data. Main results show that the current lax benchmark standards adopted by the national ETS will lead to excess surplus of permits. The whole carbon market will achieve market clearance only when the benchmark standards are set as high as the top 2% efficiency levels. If the carbon price is 200 yuan/ton, the annual trading volume will be 16.4 billion yuan and 13.2 billion yuan in extra will be spent on carbon offsetting for compliance. If the auction mechanism is introduced, the total market size will significantly increase. The auction revenue will exceed 300 billion yuan when 50% of permits are allocated through auction and will exceed 600 billion yuan when all permits are auctioned. These revenues can provide sufficient funds to accelerate China’s low-carbon transformation as well as improve social welfare.

Suggested Citation

  • Rong Ma & Haoqi Qian, 2025. "Plant-Level Evaluation Of China’S National Emissions Trading Scheme: Benchmark Matters," World Scientific Book Chapters, in: Hongbo Duan (ed.), ASIAN MITIGATION Insights, Mitigation Actions, Strategies and Policies for Asian Economies, chapter 3, pages 41-65, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789819812264_0003
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    Keywords

    Climate Mitigation; Climate Policy Assessment; Climate Change Economics; DSGE; CGE; LEAP; Input-output Model; LCA Analysis; GHG Emissions; Greenhouse Gases; Regional Studies; Policy Measures; Asia; Paris Agreement; Emissions; Carbon; Carbon Emissions; Carbon Neutrality; Decarbonisation; Climate Goals; Mitigation Strategy; Emissions Trading Scheme; China; Green Energy; Global Warming; Climate Change; Carbon Footprint;
    All these keywords.

    JEL classification:

    • 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
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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