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The Potential Gains from Carbon Emissions Trading in China’s Industrial Sectors

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Abstract

The command and control mechanism and the market trading mechanism have been adopted by Chinese government to reduce the industrial carbon emissions. Concerns have arisen over which policy is more effective and what are the potential gains from carbon emissions trading for industrial sectors. A Data Envelopment Analysis based linear programming technology is used to compare the industrial potential gains including both the economic potential gains and the environmental potential gains from the command and control and carbon emissions trading mechanisms. An empirical study containing the data set of 38 sub-industries in China from 2006–2014 is conducted. The empirical results show that the carbon emissions trading mechanism can produce more potential gains compared with the command and control mechanism, with an average of 69.6 and 92.0% economic potential gains and 49.1 and 21.0% environmental potential gains in terms of the overall level and industrial level, respectively. Additionally, the environmental potential gains of each sub-industry can provide theoretical support for the emission quotas allocation. Finally, several policy implications based on the empirical results are proposed.

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Notes

  1. Including raw coal, cleaned coal, other washed coal, coke, coke oven gas, other gas, crude oil, gasoline, kerosene, diesel oil, fuel oil, liquefied petroleum gas, refinery gas, and natural gas.

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Acknowledgements

We thank the financial support provided by the National Natural Science Foundation of China (41461118, 71603102), National Key R&D Program of China (2016YFA0602500), National Social Science Foundation of China (15ZDA054) and Research Center on Low-carbon Economy for Guangzhou Region.

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Authors and Affiliations

  1. College of Economics, Jinan University, Guangzhou, Guangdong, 510632, China

    Yanni Yu, Weijie Zhang & Ning Zhang

  2. Institute of Resource, Environment and Sustainable Development, Jinan University, Guangzhou, 510632, China

    Yanni Yu

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  1. Yanni Yu
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  2. Weijie Zhang
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  3. Ning Zhang
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Corresponding author

Correspondence to Ning Zhang.

Appendix

Appendix

The Cement and the Building Materials belong to the Manufacture of Non-metallic Mineral Products (N23). The Iron and Steel and the Electrolytic Aluminum belong to the Smelting and Pressing of Ferrous Metals (N24). In sum, the 10 sub-industries are N23 and N24, together with the Production and Distribution of Electric Power and Heat Power (N33), the Processing of Petroleum, Coking, Processing of Nuclear Fuel (N18), the Manufacture of Raw Chemical Materials and Chemical Products (N19), the Smelting and Pressing of Non-Ferrous Metals (N25), the Manufacture of Paper and Paper Products (N15), the Manufacture of Textiles (N10), the Manufacture of Rubber and Plastic Products (N22) and the Manufacture of Chemical Fibers (N21) (Tables 4 and 5).

Table 4 38 sub-industries and IDs
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Table 5 Relevant pilot sub-industries in carbon emissions trading pilots
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Yu, Y., Zhang, W. & Zhang, N. The Potential Gains from Carbon Emissions Trading in China’s Industrial Sectors. Comput Econ 52, 1175–1194 (2018). https://doi.org/10.1007/s10614-017-9724-2

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  • DOI: https://doi.org/10.1007/s10614-017-9724-2

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