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Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings

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  • Ke Wang
  • Yi-Ming Wei

    () (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)

  • Zhimin Huang

Abstract

China has recently launched its pilot carbon emissions trading markets. Theoretically, heterogeneity in abatement cost determines the efficiency advantage of market based programs over command and control policies on carbon emissions. This study tries to answer the question that what will be the abatement cost savings or GDP loss recoveries from carbon emissions trading in China from the perspective of estimating the potential gains from carbon emissions trading. A DEA based optimization model is employed in this study to estimate the potential gains from implementing two carbon emissions trading schemes compared to carbon emissions command and control scheme in China. These two schemes are spatial tradable carbon emissions permit scheme and spatial-temporal tradable carbon emissions permit scheme. The associated three types of potential gains, which are defined as the potential increases on GDP outputs through eliminating technical inefficiency, eliminating suboptimal spatial allocation of carbon emissions permit, and eliminating both suboptimal spatial and temporal allocation of carbon emissions permit, are estimated by an ex post analysis for China and its 30 provinces over 2006-2010. Substantial abatement cost savings and considerable carbon emissions reduction potentials are identified in this study which provide one argument for implementing a market based policy instrument instead of a command and control policy instrument on carbon emissions control in China.

Suggested Citation

  • Ke Wang & Yi-Ming Wei & Zhimin Huang, 2015. "Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings," CEEP-BIT Working Papers 84, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
  • Handle: RePEc:biw:wpaper:84
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    File URL: http://ceep.bit.edu.cn/docs/2018-10/20181011144851922385.pdf
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    22. Surender Kumar & Shunsuke Managi & Rakesh Kumar Jain, 2019. "CO2 Mitigation Policy for Indian Thermal Power Sector-Potential Gains from Emission Trading," Working papers 302, Centre for Development Economics, Delhi School of Economics.
    23. Xian, Yujiao & Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2019. "Would China’s power industry benefit from nationwide carbon emission permit trading? An optimization model-based ex post analysis on abatement cost savings," Applied Energy, Elsevier, vol. 235(C), pages 978-986.

    More about this item

    Keywords

    Carbon emissions; DEA; Emissions trading; Potential gains; Tradable permit;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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