Skip to main content

Advertisement

SpringerLink
Log in

Equity and emissions trading in China

  • Published:
Climatic Change Aims and scope Submit manuscript

Abstract

China has embarked on an ambitious pathway for establishing a national carbon market in the next 5–10 years. In this study, we analyze the distributional aspects of a Chinese emissions-trading scheme from ethical, economic, and stated-preference perspectives. We focus on the role of emissions permit allocation and first show how specific equity principles can be incorporated into the design of potential allocation schemes. We then assess the economic and distributional impacts of those allocation schemes using a computable general equilibrium model with regional detail for the Chinese economy. Finally, we conduct a survey among Chinese climate-policy experts on the basis of the simulated model impacts. The survey participants indicate a relative preference for allocation schemes that put less emissions-reduction burden on the western provinces, a medium burden on the central provinces, and a high burden on the eastern provinces. Most participants show strong support for allocating emissions permits based on consumption-based emissions responsibilities.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5

Similar content being viewed by others

Notes

  1. The trade in emissions permits allows emissions to be reduced at least cost, while the initial allocation of emissions permits determines the regional distribution of this cost burden.

  2. Policies in that regard are e.g., the “Western development strategy” and the “Rise of central China strategy” in the 1990s and 2000s.

  3. Following Feng et al. (2012), we group Guangxi as a western province due to its economic similarities with western provinces. Although Inner Mongolia is sometimes also grouped as a western province, we group it as a central province, which is in line with its economic characteristics and with the grouping described by the State Council of China (1986).

  4. All supplementary material are contained in an online resource, which is made available on the journal’s website.

  5. The outcome-based allocation scenarios (vertical and horizontal) depart from this methodology because they impose constraints on the outcome of economic model simulations. The horizontal EQU scenario equalizes the proportional welfare impacts across all provinces and the vertical PRG scenario distributes welfare losses in proportion to per-capita GDP. The details of the economic model and the model simulations are described in Section 3.

  6. The energy goods include coal (COL), crude oil (CRU), refined-oil and coal products (OIL), natural gas (GAS), gas manufacture and distribution (GDT), and electricity (ELE); the non-energy sectors include agriculture (AGR), minerals mining (OMN), light industries (LID), energy-intensive industries (EID), transport equipment (TME), other manufacturing industries (OID), water (WTR), trade (TRD), transport (TRP), other service industry (OTH).

  7. In particular the EQU (equal welfare losses imposed across all provinces) may not have been well understood by survey respondents, given that it is based on a theoretical construct and not on a tangible indicator or indicators, which have been used to guide the setting of China’s energy and climate policy to date.

  8. An added benefit is that the market-based nature of those flows may make them more robust and predictable than budgetary government transfers which have been subject to fluctuation in the past (Shen et al., 2012). However, a market-based scheme also means that the magnitude of the interregional flows will be subject to fluctuations in the carbon price.

References

  • Baer P, Fieldman G, Athanasiou T, Kartha S (2008) Greenhouse development rights: towards an equitable framework for global climate policy. Camb Rev Int Aff 21:649–669

    Article  Google Scholar 

  • Böhringer C, Rivers N, Rutherford TF, Wigle R (2014) Sharing the burden for climate change mitigation in the Canadian Federation. Working Paper No. V-362-14. University of Oldenburg, Department of Economics

  • Cao C (2004) China’s scientific elite. Routledge Studies on China in Transition, Book 21

  • Caron J, Metcalf GE, Reilly J (2014) The CO2 content of consumption across US regions: a multi-regional input-output (MRIO) approach. MIT Joint Program Report 266

  • Chen CC, Meindl JR, Hunt RG (1997) Testing the effects of vertical and horizontal collectivism: a study of reward allocation preferences in China. J Cross-Cult Psychol 28:44–70

    Article  Google Scholar 

  • Chen M, Zheng Y (2008) China’s regional disparity and its policy responses. China World Econ 16:16–32

    Article  Google Scholar 

  • Coase RH (1960) The problem of social cost. J Law Econ 3:1–30

    Article  Google Scholar 

  • Démurger S, Sachs JD, Woo WT, Bao S, Chang G, Mellinger A (2002) Geography, economic policy, and regional development in China. Asian Econ Pap 1:146–197

    Article  Google Scholar 

  • Eyckmans J, Finus M (2004) An empirical assessment of measures to enhance the success of global climate treaties. Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment

  • Fan S, Kanbur R, Zhang X (2011) China's regional disparities: experience and policy. Review of Development Finance 1(1):47–56

    Article  Google Scholar 

  • Feng K, Davis SJ, Sun L, Li X, Guan D, Liu W, Liu Z, Hubacek K (2013) Outsourcing CO2 within China. PNAS 110(28):11654–11659

    Article  Google Scholar 

  • Feng K, Siu YL, Guan D, Hubacek K (2012) Analyzing drivers of regional carbon dioxide emissions for China. J Ind Ecol 16(4):600–611

    Article  Google Scholar 

  • Grubb M, Sebenius J, Magalhaes A, Subak S (1992) Sharing the burden in Confronting climate change: risks, implications and responses. Cambridge University Press, Cambridge, pp 305–322

  • Guo J, Zhang Z, Meng L (2012) China’s provincial CO2 emissions embodied in international and interprovincial trade. Energ Policy 42:486–497

    Article  Google Scholar 

  • Ho P (2001) Greening without conflict? Environmentalism, NGOs and civil society in China. Dev Chang 42:893–921

    Article  Google Scholar 

  • Hood C (2010) Reviewing existing and proposed emissions trading systems. IEA Energy Pap.

  • International Energy Agency (IEA) (2007) World energy outlook 2007: China and India insights. Paris, France

  • Keidel A (2007) China regional disparities—the causes and impact of regional inequalities in income and well-being. Carnegie Endowment for International Peace

  • Kostka G (2015) Command without control: the case of China’s environmental target system. Regul Gov, in press

  • Kverndokk S (1995) Tradeable CO2 emission permits: initial distribution as a justice problem. Environ Value 4:129–148

    Article  Google Scholar 

  • Kverndokk S, Rose A (2008) Equity and justice in global warming policy. Int Rev Environ Res Econ 2:135–176

    Article  Google Scholar 

  • Lange A, Vogt C, Ziegler A (2007) On the importance of equity in international climate policy: an empirical analysis. Energ Econ 29:549–562

    Article  Google Scholar 

  • Lange A, Löschel A, Vogt C, Ziegler A (2010) On the self-interested use of equity in international climate negotiations. Eur Econ Rev 54:359–375

    Article  Google Scholar 

  • Lai HH (2002) China's western development program: its rationale, implementation, and prospects. Mod China 28:432–466

    Article  Google Scholar 

  • Law WW (2006) Citizenship, citizenship education, and the state in China in a global age. Camb J Educ 36:597–628

    Article  Google Scholar 

  • Lee WO, Ho CH (2006) Ideopolitical shifts and changes in moral education policy in China. J Moral Educ 34:413–431

    Article  Google Scholar 

  • Meng L, Guo J, Chai J, Zhang Z (2011) China’s regional CO2 emissions: characteristics, inter-regional transfer and emission reduction policies. Energ Policy 39(10):6136–6144

    Article  Google Scholar 

  • MNP (Netherlands Environmental Assessment Agency). (2007) China now No. 1 in CO2 emissions; USA in second position. www.pbl.nl/en/dossiers/Climatechange/moreinfo/Chinanowno1inCO2emissionsUSAi nsecondposition. Accessed 29 October 2012.

  • Montgomery WD (1972) Markets in licenses and efficient pollution control programs. J Econ Theory 5:395–418

    Article  Google Scholar 

  • Narayanan BG, Aguiar A, McDougall R (eds) (2012) Global trade, assistance, and production: the GTAP 8 data base, Center for Global Trade Analysis, Purdue University

  • National Statistics Bureau of China (2008) 2007 China energy statistical yearbook

  • National Statistics Bureau of China (2011) 2007 China regional input-output tables

  • NRDC (National Resources Defense Council) (2009) From Copenhagen accord to climate action: tracking national commitments to curb global warming. www.nrdc.org/international/copenhagenaccords/. Accessed 29 October 2012

  • OECD (1989) Recommendation of the council concerning the application of the polluter-pays principle to accidental pollution C(89)88. Organization of Economic Cooperation and Development, Paris

    Google Scholar 

  • Paltsev S, Reilly JM, Jacoby HD, Eckaus RS, McFarland J, Sarofim M, Asadoorian M, Babiker M (2005) The MIT Emissions Prediction and Policy Analysis (EPPA) model: Version 4, Report No. 125, Joint Program on the Science and Policy of Global Change. Massachusetts Institute of Technology, Cambridge

  • Springmann M, Zhang D, Karplus VJ (2015) Consumption-based adjustment of emissions-intensity targets: an economic analysis for China’s provinces. Environ Resour Econ 61:615–640

    Article  Google Scholar 

  • State Council of China (1986) The Seventh Five-Year Plan for national economic and social development of the People’s Republic of China, 1986–1990. State Council of China, Beijing

    Google Scholar 

  • Raupach MR et al (2014) Sharing a quota on cumulative carbon emissions. Nat Clim Chang 4:873–879

    Article  Google Scholar 

  • Ringius L, Torvanger A, Underdal A (2002) Burden sharing and fairness in international climate policy. Int Environ Agreem-P 2:1–22

    Article  Google Scholar 

  • Rose A, Stevens B, Edmonds J, Wise M (1998) International equity and differentiation in global warming policy. Environ Resour Econ 12(1):25–51

    Article  Google Scholar 

  • Rose A, Tietenberg T (1993) An international system of tradeable CO2 entitlements: implications for economic development. J Environ Dev 2(1):1–36

    Article  Google Scholar 

  • Rose A, Zhang ZX (2004) Inter-regional burden-sharing of greenhouse gas mitigation in the United States. Mitig Adapt Strateg Glob Chang 9:477–500

    Article  Google Scholar 

  • Tietenberg T (2006) Emissions trading: principles and practice. Washington, DC: Resources for the Future. United Nations Framework Convention on Climate Change (UNFCCC), 1992, Rio de Janeiro

  • Wang A (2013) The search for sustainable legitimacy: environmental law and bureaucracy in China. Harv Envtl L Rev 37:365–440

    Google Scholar 

  • Wei C, Ni J, Du L (2011) Regional allocation of carbon dioxide abatement in China. China Econ Rev 23(3):552–565

    Article  Google Scholar 

  • Yi WJ, Zou LL, Guo J, Wang K, Wei YM (2011) How can China reach its CO2 intensity reduction targets by 2020? A regional allocation based on equity and development. Energ Policy 39(5):2407–2415

    Article  Google Scholar 

  • Zhang D, Rausch S, Karplus V (2013) Quantifying regional economic impacts of CO2 intensity targets in China. Ener Econ 40:687–701

    Article  Google Scholar 

Download references

Acknowledgments

We greatly thank the survey respondents and those who facilitated the distribution of the survey, in particular Prof. Libo Wu at Fudan University. We also thank Dr. John Reilly at MIT and Dr. Cyril Cassisa at Tsinghua University for helpful comments on the survey design. The authors gratefully acknowledge the support of Eni S.p.A., the French Development Agency (AFD), ICF International, and Shell International Limited, founding sponsors of the China Energy and Climate Project, as well as the AXA Research Fund, which is supporting Marco Springmann's doctoral research. We are also grateful for support provided by the Ministry of Science and Technology of China (Grant No. 2012BAC20B07) and Rio Tinto. We further thank the MIT Joint Program on the Science and Policy of Global Change for support through a consortium of industrial sponsors and Federal grants.

Author information

Author notes

  1. Marco Springmann

    Present address: Oxford Martin Programme on the Future of Food, Nuffield Department of Population Health, University of Oxford, Old Road Campus, Headington, Oxford, OX3 7LF, UK

Authors and Affiliations

  1. Institute of Energy, Environment and Economy, Tsinghua University, Beijing, China

    Da Zhang

  2. Joint Program of the Science and Policy of Global Change, Massachusetts Institute of Technology, Cambridge, MA, USA

    Da Zhang & Valerie J. Karplus

  3. Department of Economics, University of Oldenburg, 26111, Oldenburg, Germany

    Marco Springmann

  4. Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA, USA

    Valerie J. Karplus

Authors
  1. Da Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marco Springmann
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Valerie J. Karplus
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marco Springmann.

Electronic supplementary material

Below is the link to the electronic supplementary material.

ESM 1

(DOCX 488 kb)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Zhang, D., Springmann, M. & Karplus, V.J. Equity and emissions trading in China. Climatic Change 134, 131–146 (2016). https://doi.org/10.1007/s10584-015-1516-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10584-015-1516-x

Keywords

Search

Navigation