Emissions trading schemes: an analysis of China ETS pilots

Abstract

Emission Trading Scheme (ETS) is a tool conceived with the objective to reduce as much co2 emissions as necessary, in an economic way, to comply to the goal of keeping the world’s temperature below 2°C of the Paris agreement. China embarked into this project in 2011, when the Chinese government announced in the 12th Five-Year Plan that China shall promote the development of a domestic ETS. From there, city pilots were introduced in Beijing, Shanghai, Tianjin, Chongqing, Hubei, Guangdong, Shenzhen, and Fujian. The relevance of this study lies in the reasoning that China is, at the moment, the biggest carbon dioxide emitter in the world and its climate policies and commitments affects not only the nation but also the entire world. China committing to reduce co2 also means to potentially reduce big part of the world’s carbon emission levels. This thesis analyzes the designs of the pilots, more specifically cap setting and allowance allocation, since their implementation with an overview of the different environmental, economic, and Chinese-specific factors that influenced their implementation, operations, and performances. By reframing the carbon market with Chinese characteristics, the scope of the analyses is to understand whether the ETS can be a useful climate mitigation tool for China and its implication for the future.