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  5. China鈥檚 Nationwide CO2 Emissions Trading System: A General Equilibrium Assessment

蝌蚪网 Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

China鈥檚 Nationwide CO2 Emissions Trading System: A General Equilibrium Assessment

  • Lawrence H. Goulder
  • Xianling Long
  • Chenfei Qu
  • Da Zhang
蝌蚪网 Journal: Economic Policy (Forthcoming)

Abstract

China鈥檚 CO2 emissions trading system, the world鈥檚 largest, aims to significantly reduce CO2 emissions. The system is a tradable performance standard (TPS), differing from cap and trade (C&T). We provide a dynamic general equilibrium assessment that uniquely considers institutional and fiscal features of China that affect policy costs and distributional impacts. Key findings: the TPS鈥檚 environmental benefits exceed its costs by a factor of five or more. Interactions with the fiscal system reduce or eliminate the TPS鈥檚 cost disadvantage relative to C&T. Introducing auctioning as a complementary source of allowance supply can reduce costs by 30%.

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