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How Will Policies of China’s CO 2 ETS Affect its Carbon Price: Evidence from Chinese Pilot Regions

Baochen Yang (), Chuanze Liu (), Zehao Gou (), Jiacheng Man () and Yunpeng Su ()
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Baochen Yang: College of Management and Economics, Tianjin University, Tianjin 300072, China
Chuanze Liu: College of Management and Economics, Tianjin University, Tianjin 300072, China
Zehao Gou: Chemical Engineering Department, Texas A&M University, College Station, TX 77843, USA
Jiacheng Man: College of Management and Economics, Tianjin University, Tianjin 300072, China
Yunpeng Su: College of Management and Economics, Tianjin University, Tianjin 300072, China

Sustainability, 2018, vol. 10, issue 3, 1-26

Abstract: CO 2 Emissions Trading Scheme is a key policy instrument for dealing with increasing greenhouse gas emissions. This work aims at giving some policy recommendations on the design of China’s National Emissions Trading Scheme. The experience accumulated in China’s Carbon Emissions Trading Pilots is quite valuable for China’s National Emissions Trading Scheme, so it is important to analyze the determinants of the prices in these pilots. We use the difference-in-differences model to study various policies respectively, including auction, investment access of individual and institutional traders, and carbon forward. Principal components of economy, energy, climate and allowance characteristic are respectively extracted from alternative variables, such as CPI, energy price, extreme temperature, in four categories. These principal components are set as control variables. Results show that these policies play a big role in the price discovery and stabilization. Auction drives the market price to approach the auction completion price. Carbon price exhibits a positive sensitivity to non-regulated entities’ participation and carbon forward. All the significant variables together can reflect most of the pilots’ price information. Policies have heterogeneous impacts on carbon price. The finding is robust to alternative specifications.

Keywords: price determinants; CO 2 allowance; policy effects; China’s ETS; DID model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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