The Research On Pricing For Carbon Emission Trading Market

The paper discusses carbon pricing in emissions trading markets from five aspects. The first chapter is introduction, introducing the background of international climate policy, the influencing factors and the forms of carbon pricing; doing literature review on carbon pricing; and putting forward the meaning, structure, contribution and shortage of the paper. The second chapter discusses the selection and coordination of carbon pricing instruments, introducing respectively the price-based carbon tax and quantity-based emissions trading mechanism; discussing the coordination of carbon pricing instruments and other policies within emission reduction targets. The third chapter carries on the discussion on the carbon pricing in emissions trading market, introducing the global emission trading markets; analyzing the determinants of carbon price: the government price management mechanism, policy rule, energy prices, weather changes, macroeconomic environment and financial market condition, and the idiosyncratic project risk; proposing the pricing model for emission reduction purchase agreement. The fourth chapter studies the relationship between the carbon price and the emission reduction investment based on real option mode. The geometric Brownian motion model and mean regression model are applied to calculate the threshold prices for China CDM projects in each category. The result can be used in price management in China’s emissions trading mechanism. The fifth chapter focuses on the development and exploration of China‘s carbon emissions trading markets, summarizing the thread, reasons and characteristic, proposing the issues which should be resolved in establishment of a unified national market, reviewing the price management and operation in pilot ETS.The contribution is made in three aspects. Firstly, the paper proposes the whole picture of the carbon pricing: explicit and implicit carbon pricing; carbon tax and ETS included in explicit instrument, and energy efficiency standard and energy tax in implicit instrument. The paper is concentrated on pricing in ETS, analyzing the allowances and offsets‘ pricing in primary and secondary markets. Secondly, the paper set up the price-investment model and carries on the quantitative analysis in China‘s CDM price threshold for investment in each category. The result shows that there is a negative relationship between threshold and IRR, the project with high IRR and low threshold price is more tolerate for risks; the threshold of renewable energy projects is generally higher than industrial gas so that the former is inclined less attractive under the market uncertainties; the thresholds for all the projects are higher than the secondary CER price, which means all categories should not be invested. The paper gives the reasons for the fact that many China‘s CDM projects were registered during the period: the restrict on offsets in EUETS, the support from China‘s voluntary emission reduction rules, the limited contributions by CER in the income of the project, the complexity of the CDM cooperation and distribution between the developers, and exclusion of the subsidies from the model. The result can be used in management of price floor in carbon market. The policy maker can establish a price floor and set up a mechanism that imposes the projects with low threshold and support the projects with high threshold. The income comes from the auction of the allowance or the charges of the low-threshold projects. Thirdly, the paper identifies the obstacles existing in front of the coming national ETS: legislation and regulation, coordination between the energy and climate policies, the fairness of the nation ETS and MRV system. The way to improve the management of price in carbon market is extending the innovation and market participation, implementing the price floor and ceiling, designing the mechanism of income cycling, adjusting the total cap contingently, establishing the absolute emission reduction target, founding carbon central bank, reforming the price regulation in power system and energy subsidies.