Research on Establishment of Chinese 2015 Carbon Trading Scheme
With an intention to achieve its 40-45% intensity reduction of Greenhouse Gases (GHGs) goal by 2020 from 2005 level, China has designed several policies dedicated to mitigating emissions. Most of these policies are of a command-and-control nature, whose effects tend to appear rapid, but are usually less cost-effective than market based policy instruments. Last year the central government published its 12th Five Year Plan, which announced that China would gradually establish an Emission Trading System (ETS). Last month, the government published Interim Measures on the Administration of Voluntary Greenhouse Gases Emission Reduction on domestic Voluntary Emission Reduction (VER) trading, which lays the foundation for domestic carbon offsets in China. So far, China has already launched pilot emissions trading schemes in and will set up a nationwide trading platform by 2015.
The presentation aims at providing Chinese government with the potential ways for designing domestic carbon trading system. What are the current sectoral and regional emissions? What are the potential reduction cost for each sectors and province? What industries should be involved in the ETS? How to set the emission cap and allocate the allowances to different regions? These are the questions that will be answered. There are plenty of good experiences or lessons from existed mandatory of voluntary markets. How these experiences worldwide be adopted in, or adapted to China, have also been looked at.
By using the energy consumption data from China Statistical Yearbook 2012, GHGs emissions of all sectors in China has been calculated. Computable General Equilibrium model has been used estimate the emission reduction of various industrial sectors in China after ETS has been launched under the scenario of the carbon price at 5 euro/t CO2. CO2 emission per value-added of all of the provinces in major energy intensive industries have also been calculated and compared.
The result has shown that different regions and sectors have different carbon reduction cost. Electricity generation, steel, mining, chemical engineering and some other sectors with high energy consumptions are relatively more sensitive to carbon price. The writer suggests that these sectors can be involved in the scheme first. Sectors that have different carbon cost should be involved in ETS as soon as possible in order to decrease the overall emission reduction cost. In order to increase the efficiency of ETS, the writer also suggests not involve sectors with small amount of emission because the ETS administration fees of these sectors take relatively larger portions of the total carbon cost.