CAPACITY PERMIT TRADING SCHEME, ECONOMIC WELFARE AND ENERGY INSECURITY: CASE STUDY OF COAL INDUSTRY IN CHINA
Xunpeng Shi (),
Yifan Shen (),
Ke Wang () and
Additional contact information
Yanfang Zhang: #xB6;¶School of Management, China University of Mining and Technology Xuzhou, Jiangsu 221116, P. R. China
The Singapore Economic Review (SER), 2021, vol. 66, issue 02, 369-389
Cutting the overcapacity in coal industry is a current critical issue in China and is a matter for the world. However, inappropriate capacity cut policies may induce huge fluctuations of energy price, creating a threat to energy security and even economic stability. This paper designs a capacity permit trading scheme to minimize the compliance cost of production capacity cut, and proposes the operational details of capacity permit trading scheme using China’s coal industry as an example. We also construct a simple partial equilibrium model to examine the benefits and firm behaviors when adopting the permit trading scheme. The results demonstrate that the permit trading scheme will generate an overall positive social welfare as well as reduce firms’ cheating incentives. The results confirm that the more heterogeneous the firms are in terms of compliance costs, the higher will be the social welfare gains and the trade volume. Our findings show that the proposed permit trading scheme is feasible and beneficial in achieving the capacity cut target in China.
Keywords: Overcapacity; individual transferable quotas; permit trading scheme; China; coal (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wsi:serxxx:v:66:y:2021:i:02:n:s0217590819500589
Ordering information: This journal article can be ordered from
Access Statistics for this article
The Singapore Economic Review (SER) is currently edited by Euston Quah
More articles in The Singapore Economic Review (SER) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().