Legal Regulation On Emission Trading

In the environmental management system,the emission trading system is a pollution control method that utilizes market mechanism to motivate polluters.Although emission rights are characterized by both public rights and private rights,the emission trading system is designed to highlight its private right attribute,take the advantage of the effect of markets on the allocation of environmental capacity resources,and improve the environmental protection efficiency.To realize this purpose,restricting government’s public power and avoiding its excessive intervention on trading process have become a key factor in the design of the emission trading system.However,the operation of the emission trading system cannot be isolated from the administrative management of trading activities by public power.From the perspective of law-based governance and ecological civilization construction,legal regulations play an important role in emission trading.The so-called regulation,in this paper,includes both the regulation on the trading activities of polluters and the regulation on the administrative actions of environmental protection departments at all levels.In the dissertation,Section 1 analyzes the background information of the topic and the status quo of the research on legal regulations in emission trading.With the development of China’s industrialization and urbanization,economy grows rapidly,and material wealth also accumulates quickly.However,the consequent increase in pollutant emission leads to the deterioration of the ecological environment.In order to protect the environmental rights of citizens,the emission trading system was tentatively established in 1990 s.However,the system,having been piloted for more than 20 years,does not meet our expectations.People could not help but wonder why the emission trading system,so successfully executed in the United States and the European Union with tremendous economic,environmental and social benefits,fails to achieve anticipated result in China.This problem has haunted and motivated the author to retrospect the emission trading history abroad,to review the practice of pilot emission trading in China,to summarize successful experience and causes of failure,and to explore an emission trading system with Chinese characteristics.This section sums up domestic and overseas achievements in the basic theory of emission trading,the initial allocation of emission rights,and government’s role in emission trading,thus,laying a solid foundation for further discussion.In Section 2,the theoretical foundation of emission trading is discussed.First,the connotation of emission rights is analyzed.Theoretically speaking,emission rights are the rights of human beings to emit amount of pollutants into the environment in production and in life,so they belong to legal rights.Practically speaking,emission rights refer to the rights to use environment capacity that are applied for by polluters,and also granted by government.They belong to a substantive right with legal confirmation.Second,the legal attribute of emission rights is discussed.Three theories exist: natural resource real rights theory,quasi-property theory,and natural resource possession rights theory.In a word,emission rights are defined as a property right,which reflects the characteristic of the property system in Civil Law System.In essence,emission rights are an instrumental property right.For polluters,granting emission rights with the attribute of property rights can motivate the enthusiasm and initiative of polluters to enforce pollution control.For government,emission trading is only a means to enforce environmental management.These private rights will be granted to polluters if not for the purpose of improving environmental management efficiency.Third,the theoretical basis of emission trading is analyzed,including a series of economic theories(e.g.,Pigouian Theory,Coase Theorem,the resource scarcity theory and Harding’s “the tragedy of the commons”),as well as management theories(e.g.,market-based public administration theory and institutional change theory).Section 3,taking the United States and the EU as examples,first analyzes the emission trading system in the United States.The reasons of American success are summarized as follows: 1)a large number of participants are invited in emission trading,forming a large trading market;2)a perfect law and regulation system sets a legal basis for emission trading;3)accurate automatic pollutant monitoring equipment provides a strong technical support for emission trading;4)due to the government’s minimal intervention on emission trading,and the full exertion of polluters’ role as market entity,the efficiency of emission trading is substantially improved.Section 3 also analyzes the contributions of EU’s carbon emission trading on global greenhouse gas control.First,it resolves the crisis of Kyoto Protocol,leading to a global control of greenhouse gas emissions;Second,the EU has established the world’s largest carbon emission trading market;Third,the EU’s carbon emission trading has established a new mode for environmental governance,providing us with profound enlightenments: 1)a perfect legal system is the legal basis for carbon trading;2)harsh penalties provide institutional guarantee for the implementation of carbon emission trading.The EU not only gives an economic punishment on excessive emissions,but also deducts the excessive quotas from next year’s total quotas;3)a mature automatic monitoring system drastically improves the EU’s regulation efficiency;4)a mature market mechanism provides a social basis for carbon emission trading.Furthermore,Section 3 also reviews the emission trading practice pilot in China.Although the overall emission trading system fails to meet the expectations,some experience has been obtained through local pilot work: 1)emission gross control system and emission permit system have been built,which sets a premise and foundation for emission trading;2)the notion that pollutant emission is valuable has been preliminarily built up;3)a series of local emission trading regulations,rules and policies have been developed;4)emission trading practices hasten the establishment of professional emission trading institutions.However,there still exist many problems in China’s emission trading system,which restrict its role in environmental regulation: 1)China has not established a national emission trading system which the trading activities of polluters have to follow;2)emission trading markets are not activated because polluters,often reluctant to put surplus emission rights on markets,are not fully motivated;3)There lacks scientificity and consistency in emission gross control system.Local governments tend to break through gross targets for their economic growth,or accomplish emission reduction task by playing with number tricks,which shatters the confidence of polluters on the emission trading system;4)the existing environmental regulation methods cannot meet the requirements of emission trading regulation.For example,automatic pollution source monitoring equipment is not widely used,and modern information network technologies are not fully applied in emission trading platforms.All those problems result from the concept of anthropocentrism,from which ecological civilization concept is totally excluded.Under the influence of anthropocentrism,economic development gradually becomes the sole highlight of government,with environmental protection only written on paper,hung on the wall,and mentioned in the mouth;Environmental protection industry lacks innovation and originality;Automatic monitoring equipment,with poor precision and stability,cannot provide accurate and reliable automatic monitoring data for environmental regulations,so cannot satisfy the need of environmental management;Our market economy fails to activate polluters due to its low level and weak trading and competition consciousness,leading to a high social cost for pollution control.Meanwhile,the powerful propulsion of the paid use system by government causes the deviation of the emission trading system from the original purpose.The constitution of the emission trading system is discussed in Section 4,including the pollutant gross control,the initial allocation of emission rights and emission trading in secondary markets.The government’s regulation on emission is first reflected in the pollutant gross control,without which,environment capacity is impossible to become a scarce resource,so the basis of emission trading will not exist.Therefore,the pollutant gross control is the premise of emission trading.Emission gross control is divided into capacity gross and target gross.Capacity gross,which reflects the scientificity and the rationality of gross control,needs technical support.However,current technology cannot calculate capacity gross accurately.Target gross,comparatively more feasible,has become a temporary expedient for current pollutant gross control.The initial allocation of emission rights is another important aspect of government’s regulation on emission trading,involving the configuration principles of environment capacity resources,the configuration rules and the configuration mode.The initial allocation principles include fair principle,the information disclosure principle,the optimal efficiency principle and the gross control principle.The initial allocation rules include the previous possession and the current possession.The former reflects the historical environmental externalities of the polluters’ production process,indicating polluters’ environmental pollution contribution history,while the latter reflects the current environmental externalities of the polluters’ production process,indicating polluters’ current environmental pollution contribution.The initial allocation includes free allocation and paid allocation.Free allocation can reduce the external resistance in allocations,but ignores the value of emission rights,while with paid allocation,it is just the opposite.Under the circumstances that environment pollution is becoming increasingly serious,the paid use of environment capacity has become inevitable.Note that the legal regulations on the paid use of emission rights should conform to other existing environment management systems such as emission fee system,and the upcoming environment pollution tax system.The polluters with emission permits should be exempt from emission fee or environment pollution tax after paying the paid fee for emission rights,while the polluters without emission permits,based on their emission volume,pay their emission fee or environment pollution tax in terms of relevant laws and regulations,since neither the paid fee or emission fee,or the environment pollution tax,are calculated on the cost of environment pollution control.Double dipping is not legally justified,but reflecting the profligacy of public power.Emission trading between polluters is the core of the emission trading system.Without active secondary market for emission trading,the emission trading system will be alienated into a government means to collect fees from polluters.Contracts are a key factor to the transfer of surplus pollution quotas between polluters.Different from traditional civil legal relations,the subject,object and contents of the emission legal relation have their own special features.The establishment,effect and effectiveness of an emission trading contract are also different from traditional civil contracts.The absence or the excessive intervention of government should be avoided.The basic principle for government is to execute a minimum intervention,to respect the principal position of polluters in trading markets,to stimulate traders’ enthusiasm and initiative,and to fully exert the decisive role of markets in emission allocation.The measures to perfect China’s regulation on emission trading are proposed in Section 5.Emission trading pilots in China have been implemented for more than 20 years,with undesirable result.The reasons are as follows: 1)China’s market economy is not mature(social basis);2)the whole society has no confidence on automatic pollution source monitoring system and automatic monitoring data(technical basis);and 3)emission trading laws and regulations are not complete(legal basis).In view of practical problems,the author analyzes from the necessity and the feasibility of system transplantation.As an exotic system,the implementation of emission trading system in China is necessary and feasible.But the undesirable result of emission trading in China indicates that without the localization and the combination with Chinese characteristics,an economic legal system,no matter how good it is,still cannot thrive.In terms of Chinese reality,a suggestion to build a national emission trading law is proposed in the dissertation.In environment management practice,automatic pollution source monitoring system and automatic monitoring data are often criticized due to the incomplete legal regulations.Having a review on the history and status quo of the automatic pollution source monitoring,Section analyzes the legal dilemma of automatic monitoring.First,the legal status of the automatic monitoring system has been questioned;Second,the construction legitimacy of automatic monitoring system has been challenged;Third,the legitimacy of the automatic monitoring data has been denied.The reasons for these problems are as follows: 1)the automatic monitoring facilities accept no mandatory verification;2)automatic monitoring data is not effectively reviewed;3)the quality of automatic monitoring data cannot be guaranteed;4)polluters intervene in the normal operation of automatic monitoring facilities;5)the poor enforcement of environmental monitoring departments.To fully exert the function of automatic monitoring data in emission trading,a series of proposals are put forward: perfect sets of laws for automatic monitoring;improve the management on operation maintenance quality of automatic monitoring facilities;intensify efforts against illegal activities to automatic monitoring facilities;build a linkage mechanism among government departments;and establish the legal status and authority of the automatic monitoring data.To stimulate the inactive emission trading markets,the author presents a series of suggestions as follows: expand the scope of trading subjects to allow polluters with high cost in pollution control to be the transferee of surplus emission;cancel emission trading service fee and tax to reduce the burden of traders;securitize emission asset,and establish emission mortgage mechanism to fund traders.In the design of emission trading system,the key problem is to restrict government’s public power,to prevent the excessive intervention of public power on private rights,and to prevent the rent-seeking activities of public power.But,as an economic legal system with the attributes of both public and private rights,government is indispensable in emission trading,and the key problem is its accurate positioning.Government should strengthen the supervision on emission trading both ongoing and afterwards and severely punish illegal activities in the deal.The ideal system is designed as follow: tighten the cage of legal system;strictly punish excessive emissions;restrict the intervention of government’s public power on markets;set an exit for the free trade of surplus emission;guide the benign development of emission trading markets;through the dual regulations of incentive and constraint,efficiently configure environment resources;reduce the social marginal cost in pollution control;and leave a surplus environment capacity for sustained economic development.Using market mechanism to control pollution,the emission trading system,as an innovation in environment management system,has been highly praised by scholars both at home and abroad.However,the author believes that the emission trading system is an optional system,but not the only one for environment management.China now is faced with serious pressure from environment pollution.Under the circumstances of immature market economy,the traditional command-and-control management mode is still the mainstream in environment management,with emission trading only an auxiliary means.In the future,with the gradual maturity of social system and technical support,the emission trading system will step into the main battlefield of environmental management.