Linking Emissions Trading Schemes: Economic Valuation of a Joint China–Japan–Korea Carbon Market

Zhongyu Ma, Songfeng Cai, Weifeng Ye and Alun Gu
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Zhongyu Ma: State Information Center, Beijing 100045, China
Songfeng Cai: State Information Center, Beijing 100045, China
Weifeng Ye: College of Earth and Environmental Sciences, Lanzhou University, Lanzhou 730000, China
Alun Gu: Institute of Energy, Environment and Economy, Tsinghua University, Beijing 100084, China

Sustainability, 2019, vol. 11, issue 19, 1-12

Abstract: Linking carbon emissions trading systems across countries has become an important tool for global emission reduction. The three high-emission Asian countries, China, Japan, and South Korea (ROK), all have initiated carbon trading and published ambitious Intended Nationally Determined Contribution targets. Since 2016, the three countries have discussed establishing a long-term unified market for carbon emissions trading, and have sought a scheme for such exchange. This study aimed to investigate whether linking the carbon emissions trading systems of these three countries could potentially achieve more ambitious emission reduction targets. A dynamic energy-environmental version of the Global Trade Analysis Project model was used to simulate carbon market linkages across the three countries. The results indicated that a linked China–Japan–ROK carbon market would be highly cost-effective, have positive economic benefits for all three countries, and improve the carbon market’s liquidity and transaction scale. Under a scenario with no carbon market linking, the economic losses in China, Japan, and ROK would be $51.55 billion, $13.55 billion, and $74.19 billion, respectively. Meanwhile, with carbon trading linking, the losses would be reduced to $47.08 billion, $5.37 billion, and $9.10 billion, respectively. Therefore, a joint China–Japan–ROK carbon market could greatly promote the adoption of market-based tools for emission reduction.

Keywords: carbon emissions trading scheme; GTAP-E (an energy-environmental version of the Global Trade Analysis Project model); economic valuation; cost-effectiveness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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