Lessons learned from China’s regional carbon market pilots

Zhang, Junjie; Wang, Zhenxuan; Du, Xinming

doi:10.5547/2160-5890.6.2.jzha

Cited by 59 publications

(18 citation statements)

References 9 publications

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“…Its experience with carbon markets started in the early 2000s through the Clean Development Mechanism, a voluntary carbon offset scheme created by the Kyoto Protocol (2). China's regional carbon ETS pilots, announced in 2011 and launched in 2013, marked its first systematic attempt to use market-based instruments to regulate firm carbon emissions (3). Building on the experience of regional pilots, China brought a national carbon ETS, the largest carbon market in the world, online in 2021.…”

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confidence: 99%

The effectiveness of China’s regional carbon market pilots in reducing firm emissions

Cui

Wang

Zhang

et al. 2021

Proc. Natl. Acad. Sci. U.S.A.

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China has implemented an emission trading system (ETS) to reduce its ever-increasing greenhouse gas emissions while maintaining rapid economic growth. With low carbon prices and infrequent allowance trading, whether China’s ETS is an effective approach for climate mitigation has entered the center of the policy and research debate. Utilizing China’s regional ETS pilots as a quasi-natural experiment, we provide a comprehensive assessment of the effects of ETS on firm carbon emissions and economic outcomes by means of a matched difference-in-differences (DID) approach. The empirical analysis is based on a unique panel dataset of firm tax records in the manufacturing and public utility sectors during 2009 to 2015. We show unambiguous evidence that the regional ETS pilots are effective in reducing firm emissions, leading to a 16.7% reduction in total emissions and a 9.7% reduction in emission intensity. Regulated firms achieve emission abatement through conserving energy consumption and switching to low-carbon fuels. The economic consequences of the ETS are mixed. On one hand, the ETS has a negative impact on employment and capital input; on the other hand, the ETS incentivizes regulated firms to improve productivity. In the aggregate, the ETS does not exhibit statistically significant effects on output and export. We also find that the ETS displays notable heterogeneity across pilots. Mass-based allowance allocation rules, higher carbon prices, and active allowance trading contribute to more pronounced effects in emission abatement.

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confidence: 99%

The effectiveness of China’s regional carbon market pilots in reducing firm emissions

Cui

Wang

Zhang

et al. 2021

Proc. Natl. Acad. Sci. U.S.A.

Self Cite

152

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“…This quantitative analysis complements a number of recent empirical studies of China's efforts to reduce CO 2 emissions through emissions trading. See, for example,Duan and Zhou (2017), Ho, Wang, andYu (2017),Teng, Jotzo, and Wang (2017),Karplus andZhang, Wang, andDu (2017). Our numerical model is unique in its sharp focus on the incentive effects of the TPS and its ability to yield a close comparison of the impacts of the TPS and C&T.7 Other factors can mitigate the potential disadvantages of rate-based approaches such as the TPS Goulder, Hafstead, and Williams (2016).…”

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confidence: 99%

China's Unconventional Nationwide CO₂ Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy

Goulder¹,

Long²,

Lu³

et al. 2019

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“…In 2017, China implemented an effective emissions trading scheme (ETS), the most efficient and important policy measure for carbon emissions reduction in the country. The previous pilot market test from 2013-2016 showed trade of 94 million tonnes of emissions allowances at an average price of $3.72/tonne (Zhang 2017). This is in addition to previous energy productivity achievements from 1995 onward (Atalla and Bean 2015).…”

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confidence: 68%