Equity and emissions trading in China
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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.
KeywordsAllocation Scheme Marginal Abatement Cost Eastern Province Western Province Computable General Equilibrium Model
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.
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