China's Unconventional Nationwide Co<Sub>2</Sub> Emissions Trading System : The Wide-Ranging Impacts of an Implicit Output Subsidy
China is planning to implement the largest CO<sub>2</sub> emissions trading system in the world. To reduce emissions, the system will be a tradable performance standard (TPS), an emissions pricing mechanism that differs significantly from the emissions pricing instruments used in other countries, such as cap and trade (C&T) and a carbon tax. We employ matching analytically and numerically solved models to assess the cost-effectiveness and distributional impacts of China's forthcoming TPS for achieving CO<sub>2</sub> emissions reductions from the power sector.We find that the TPS's implicit subsidy to electricity output has wide-ranging consequences for both cost-effectiveness and distribution. In terms of cost-effectiveness, the subsidy disadvantages the TPS relative to C&T by causing power plants to make less efficient use of output-reduction as a way of reducing emissions (indeed, it induces some generators to increase output) and by limiting the cost-reducing potential of allowance trading. In our central case simulations, TPS's overall costs are about 47 percent higher than under C&T. At the same time, the TPS has distribution-related attractions. Through the use of multiple benchmarks (maximal emission-output ratios consistent with compliance), it can serve distributional objectives. And because it yields smaller increases in electricity prices than a comparable C&T system, it implies less international emissions leakage.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w26537"
Year of publication: |
2019
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Authors: | Goulder, Lawrence H. |
Other Persons: | Long, Xianling (contributor) ; Lu, Jieyi (contributor) ; Morgenstern, Richard D. (contributor) |
Publisher: |
[2019]: [S.l.] : SSRN |
Subject: | China | Emissionshandel | Emissions trading | Subvention | Subsidy | Wirkungsanalyse | Impact assessment | Umweltbelastung | Pollution |
Saved in:
freely available
Extent: | 1 Online-Ressource (54 p) |
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Series: | NBER Working Paper ; No. w26537 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2019 erstellt |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012858028