The Operation Mechanism And Application Study Of Emission Trading

As a developing country, China stays in the early stages of economic growth, industrialization and urbanization. In addition, the heavy industry, manufacturing together with transport is gaining a quite rapid development. Thus the whole society is now inevitably facing a series of problems such as substantial rise of energy demand, and pollution pressure generated by the increasing energy consumption. It should be said, limited energy and rising pollution is a bottle-neck for China's economic transformation and sustainable development.In regard of this phenomenon, China has launched relevant environment developing policies since 1970's. But due to lack of market concepts and in complete mechanisms, the environmental policies were mainly executed as administrative orders. It's true that the mandatory implementation of administrative policies have made some achievements and progress, however, in the field of environmental regulation, an effective, comprehensive market-based environmental tools did not get produced as expected. Therefore, the process of implementation of energy-saving and emission-reduction in China is slow, and the actual effect is far from what is expected. We should give full play to market-based environmental tools in promoting the process of energy saving while highlighting the vantages of "endogenous mechanism, automatic adjustment, target controllable, flexible operating" since these are main trend of future environment planning. Among all the market-based environmental tools, emission trading itself is well equipped with low pollution control cost, less information requirements, low financial requirements, possible to realize total controlling and it won't be affected by economic expansion and inflation. All the above mentioned advantages decided that the emission trading can meet the developing requirements of China in current economic status.Emission trading takes place between the various subjects in need of warrants, this makes the market running processes and results depend more on the behaviors of every micro economic subject. And what link every different subject's behaviors are warrants prices and running principles determined by pricing mechanism. In the traditional study of behavioral economics, behavior variations of "rational economic man" are always caused by changing of the cost and benefit function, and price variation, as a kind of market signal, can change cost or benefit function separately as well as change cost and benefit function in the mean while. It is the same case for the mechanism of emission trading to change pollution-controlling behavior to make it meet with the most excellent social standard. A reasonable external pricing of environmental pollution, which will be internalized to warrant price, will become an endogenous variable for cost-benefit function of an economic subject. And this point tells us that the core mechanism of emission trading is its pricing process, which can lead us to arrive at an optimal allocation of resource allocation as well as responsibility for pollution control.It is true that pricing process is important, but it cannot be separated from application condition, for example, only when the scarcity and property rights of environmental resource is confirmed, we can do calculation, allocation and pricing of environment capacity. Only when there are basic trading demands and speculative demand existed in the market, the emission trading has motivations for storage, transfer and trading. And an equal exchange between environmental resources can only happens with a precondition of comparable and exchangeable units of measurement. Emission trading can effectively price and trade only in close region which can avoid price failure from "voting by foot". This thesis gives a further study on the core mechanism of emission trading by listing the following points:Firstly, emission trading has natures of trading, marketing and financial, and among which the nature of trading decides the value of emission right which make it price, marketing ensures that pricing must reasonable and effective in order to realize the optimized allocation, financial makes diversified pricing such as futures pricing and optional pricing an inevitable case. Meanwhile, due to the different abatement costs, emissions for each subject has also a different value, this will produce differences among emissions requirements, trading requirements and speculative demand. Correspondingly, the emission markets generated from three kinds of demands have different pricing mechanism. Secondly, it is true that the public character of environmental resources can not price via value and demand-supply relationship, the only way it works is to obey the economical principle of "Marginal cost=Price". However, this is a long-term pricing mechanism basing on a completed-competition and zero cost. It won't go along with the actually pricing status and conditions, so we are required to search for a new pricing mechanism which can reflect the influence of different variables such as region, time, environment etc.Thirdly, since environment resource has different physical characrer, there is no exchange requirement and mechanism existed among different types of environmental resources. But the finance character of emission trading makes the storage and value exchanging become possible, so original demands of trading between different types of environment resources get generated. As for same category of environment resources, due to its equivalent measurement standards, can be directly exchanged in the market. For different types of environmental resources, if we simply carry out trading by monetary value, relative changes between of resources types and economic and technological progress cannot be revealed as expected, so we should select and design a media variable which has unidirectional relationship with two different resources, i.e. GDP.Fourthly, the efficient pricing of emission trading needs a close region which can definite demand-supply relationship region, avoid "voting by foot" and reduce efficiency loss. Considering the objects of emission trading is featured with completion of bio-systems, in the meanwhile, the reform of existed policy and administrative systems still need a comparatively long period, then the close region should select the association of geography and administration.To take an overview of the history and develop trail of China's emission trading, it still has an obvious feature of a pilot phase as the trading is mainly directed or guided by central government. Thus prices formed under this kind of circumstance always take features like subjectivity and human-made, inefficient prices like this are hard to embody the real market value. Moreover, China's such administrative intervention is not conducive to the formation of a unified national market, thus can not effectively link the international market. After referring and researching into emission trading operating mode and market establish of USA as well as European Union, we discover that the main flaw of China's emission trading system lies on the administrative government power and the improper market mechanism which always give out an incorrect orientation and unclear direction etc.On the judgments of emissions trading trends and prospects for China, the thesis designed and launched an emission trading market pricing mechanism for China's specifications. And this mechanism includes following:an original pricing and allocating mechanism based on dynamic welfare and regional discrepancies; a secondary pricing and allocating mechanism including spot price, holding cost, expectations and external variables. And all the illustrations are supported by vivid example of water trading in Bohai economic circle. Finally, on the point of coordination of government and market mechanism, the thesis gives suggestions on operation environment and additional measures of emission trading in China, including setting up regulatory institution, elect-clearing center and adjusting funds, constructing two-lay exchange board, implementing different pricing mechanism, developing green finance (such as setting up environmental bank, developing deposit-loan and mortgage business based on warrants etc), promoting environmental legislation and providing policy incentives etc.In a conclusion, this thesis will be of great theoretical and practical significance in playing the macro-control of emission trading policies. On the one hand, it will help to improve and complete research content for the environmental economics and financial innovation. On the other hand, the effective operation of the emissions trading can lower the costs of pollution control with a higher efficiency and promote industry upgrade which is important to realize the policy goal of "ensuring increase and adjusting structure".