Research On Allocation Of Carbon Emission Rights And Abatement Mechanism For China

The situation of greenhouse gases (dominated by carbon dioxide) abatement has been increasinglygrim along with the warming global climate and the frequent extreme disasters in recent years.Carbon mitigation has already become one of the environmental&economic research hot spots.Multiple complex characteristics of carbon emission reduction, including environmental variability,extensiveness of those regulated, diversity of reduction approaches and uncertainty of developmenttrends, make the analysis and formulation of emission policies a difficult problem. Under the totalcontrol targets, the initial allocation of carbon emission defines emission rights of regulated bodies;the abatement mechanism offers emitters flexible mitigation approaches and incentive policies, all ofwhich are of important theoretical and realistic significance for promoting energy saving, emissionreduction and coordinated economy-society development.This paper, following the Scientific Outlook on Development and Sustainable Developmenttheory, based on the externality theory, public goods theory, property rights theory and comparativeadvantage theory, proposes gradient abatement framework according to domestic carbon emissionperformance and reduction cost, designs a free distribution model with two-stage optimization offairness and efficiency and a uniform-price auction allocation mechanism of emission rights, studiesemitter’s abatement investment decisions under complex conditions, lays out the initialconfigurations of emission rights allocation and abatement mechanisms, meanwhile puts forward theregulatory policies for effective emission reduction using by the methods of normative analysis andempirical analysis. The specific research contents and innovations are as follows:1. Puts forward the basic framework of carbon emission reductionBased on carbon emissions and GDP of Chinese30provinces, the co-integration and causality ofcarbon emissions and economic growth for both China and each province are explored. Using bynon-parameter DEA method, the environmental directional distance function and shadow price areestimated, meanwhile the carbon emission efficiency and the reduction cost among provinces areevaluated and compared. Results show that, there exists close relation between the carbon emissionefficiency and the level of economic development, resources and energy utilization efficiency andother factors; in addition, the developed eastern coastal and central provinces with high level ofenergy utilization have high emission efficiency, while the carbon emission efficiency of the minorundeveloped central and western regions with rich resources is much lower. Furthermore, the turningpoint appeared in2002, and the shadow price of carbon emissions during1996-2010firstly rosebefore2002and then gradually declined. Based on K-means clustering, in which the clusteringindices covering the provincial distance function, the shadow price of carbon emissions, growth rate of carbon emissions and economic output, Chinese30provinces are divided into three zones: steepslope zone, flat zone and plateau zone. According to the emission characteristics of three zones,recommended policies containing “guaranteeing economic growth, implementing small-degreereduction”,“first strength reduction, then total control” and “slightly strict total control” areprovided.2. Designs the initial allocation scheme of carbon emission rightsAccording to the panel data of Chinese energy structure, energy intensity, economic growth,industrial structure and population size in1996-2010, the total carbon emissions can be resolved toemissions from “3industries” and “3energies”(coal, oil, natural gas) using by the logarithmic meanDivisia index decomposition method. Results show that for Chinese carbon emissions growth, thepositive driving factors contributed most is per capita GDP, which followed by energy structure andpopulation; the negative inhibiting factors are, in order, energy intensity and industrial structure.Taking carbon emissions, economic output, population, energy structure, industrial structure andforest areas as the fairness indices, and carbon intensity as the efficiency index, a free allocationmodel with two-level optimization is proposed. The objective for the first level optimization isfairness maximization, in which the index weights were calculated by method of information entropy;while the second level optimization is to pursue maximum of efficiency. Based on the two-leveloptimization model and data from2006-2010, the carbon emission rights allocation scheme forChinese30provinces in2011is obtained. Allocation for2016is on the basis of data from2011-2015,and so on.According to the auction theory, a uniform-price and asymmetric private value auction allocationmechanism is established. Moreover, the weakly dominant bidding strategies and linear equilibriumbidding strategies for bidders were given by equilibrium analysis. The impact of the reserve price onthe equilibrium results is also discussed. Based on this auction model, the carbon emissions auctionfor Anhui province in2015were calculated, and the auction schemes with and without reserve pricewere compared also. Results indicate that, under higher reserve price the government’s auctionrevenue would increase while the turnover fall; in addition, by contrast of constant bidding strategy,the volume and revenue in the two adjusted schemes are improved, meanwhile between the twoschemes, the turnover of the scheme with higher total pay is higher too.3. Studies enterprise’s reduction investment decision under uncertaintiesAfter discussing the basic principle and main contents of the emission reduction mechanism, thesources, main types, potential economic impacts and measurement method of uncertainty in carbonemissions reduction are analyzed. Making a domestic power generation company as an example, areal-options abatement investment model is built, in which exogenous uncertainties including theprice of electricity, fuel price, the price of carbon emissions and endogenous uncertainties containing technological progress and carbon reduction rate, then the threshold condition of investment,expected investment opportunity and the best proportion of investment subsidies are given. Using bythe sensitivity analysis of parameters, and by the help of Monte Carlo simulation, some importantconclusions can be found: the increase of volatility risk of the carbon price will make investmentthreshold bigger and delay investment; while technological progress, proportion of subsidies andcarbon emission reduction rate have negative impacts on investment threshold and investment time,that is, the faster the technological progress meanwhile the greater of the proportion of reductionsubsides and reduction rates are, the lower the investment threshold and the earlier the investmenttime are, or vice versa.4. Proposes the basic idea and policy implications of Chinese carbon emission reductionmechanismBased on systematic comparison of different allocation methods, an allocation scheme of carbonemission rights for China is constructed. Then three flexible mechanisms (ET, CDM and JI) arecompared systematically from differences in cost effectiveness, environmental effectiveness andpolitical feasibility. Although the cost effectiveness of ET is better than that of CDM and JI, itsenvironmental effectiveness and political feasibility are worse. Using a simple reduction investmentgame model including a government and an enterprise, the conditions of utility maximization for thetwo participants are derived. Learn from the successful experience of international emissionreduction mechanism, combined with China specific conditions, the basic scheme for carbonemission reduction is put forward in light of the planning of abatement mechanism, statisticalmonitoring mechanism, incentive-constrain mechanism, and other mechanisms involved, and somereasonable policy suggestions are provided at the same time.