The Initial Allocation of Carbon Emission Quotas in China Based on the Industry Perspective

Bao-Jun Tang, Yu-Jie Hu and Yang Yang

Emerging Markets Finance and Trade, 2021, vol. 57, issue 4, 931-948

Abstract: On December 19th, 2017, China’s Emissions Trading System (CETS) was officially launched, firstly only covering the power industry. Cap setting and allowance allocation are urgent issues for the government. Because of the different characteristics of sectors, this paper tries to propose a reasonable and effective allocation scheme from the industry perspective for the government. Firstly, it adopts traditional methods, namely grandfathering and benchmarking. Secondly, it proposes theoretical allocation schemes. Finally, the most effective scheme is selected for sectors. Results show that quotas of grandfathering scheme are larger than that of benchmarking scheme. Among four theoretical scenarios, quotas in the preferring capacity scenario are the lowest and those in the preferring potential scenario are the highest. Quotas of the manufacturing and electricity, gas, and water production and supply industries are higher. In the industrial sectors, quotas of the light and high-tech industries are lower. Results of regional quotas calculations in the preferring capacity scheme are consistent with the regional carbon intensity reduction target in the 13th Five-Year Plan Work Program for Controlling GHG Emissions. After comparing all schemes, this paper determines that theoretical scheme is the most effective for its balance on emissions reduction and development of sectors.

Date: 2021
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DOI: 10.1080/1540496X.2019.1645006

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