China's Rate-Based Approach to Reducing CO2 Emissions: Attractions, Limitations, and Alternatives

Lawrence H. Goulder and Richard D. Morgenstern

AEA Papers and Proceedings, 2018, vol. 108, 458-62

Abstract: A distinguishing feature of China's recently launched emissions trading system (ETS) is its rate-based structure. This structure governs the way emissions allowances are allocated and the conditions for compliance, and it has important implications for system performance. We show that the rate-based structure implies a wedge between the marginal costs of emissions abatement as perceived by firms and society's marginal costs of abatement. Moving to a mass-based system would eliminate this wedge and thereby yield significant gains in terms of cost-effectiveness and efficiency (aggregate net benefits). We indicate that these gains could be realized while addressing concerns about distributional equity.

JEL-codes: O13 P28 P31 Q52 Q54 Q58 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/pandp.20181028
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/pandp.20181028 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... vHEK9P2OySjZcHmyLPSN (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... CKvS5W_vpaN5-Iq8rCHY (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:apandp:v:108:y:2018:p:458-62

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/subscribe.html

Access Statistics for this article

AEA Papers and Proceedings is currently edited by William Johnson and Kelly Markel

More articles in AEA Papers and Proceedings from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().