| Atmospheric pollution is a highly debated issue of 21st century and has attracted attentions from all the countries all over the world.It includes two aspects:greenhouse gas emissions and air pollutant emission.In recent 30 years of China,rapid economic growth brings about tremendous carbon dioxide emissions.In 2007,China's CO2 emissions ranked first in the world,and in 2015 it emitted twice as much CO2 as United States,which ranked the second in the world in terms of CO2 emissions.Because the amount of CO2 emission is an indicator for economic activity level of a country,it reflects two other problems induced by economic growth:energy consumption and environmental contamination.In China,the primary energy consumption in 2010(3.24 billion ton of coal equivalent)has excessed the forecast of scientists in 1990(2.16 billion ton of coal equivalent),whereas the total primary energy consumption of the world in 1990 is only 11.4 billion tce.Thus,China is facing a menace to its energy security.In addition,since the American Embassy in Beijing disclosed the information about concentration of PM2.5 in Beijing's air,smog has become the synonym for China's air quality issues and reports of smog as a representation of China enviormental issues has occupied the headlines of major media.According to the report issued by World Bank in 2013,frequently occurring smog in eastern China has led to 10 percent loss in GDP for China.At present the increasing CO2 emission,unclean energy consumption structure,and severe air pollution constitute the environmental threat of China.At the center of this issue is the emission of CO2,China is in urgent need of developing an effective mechanism to save energy,reduce the consumption of carbon and CO2 emissions,and encourage the corporations to get involved in environmental protection.It is vital that the environmental and energy threats of our country be eliminated from the root,through the mechanism of improving social and environmental preferences of the public.With this background,our country began construction of the carbon trading pilot market in 2011.By the end of 2013,seven pilot markets have been launched in Beijing,Tianjin,Shanghai,Hubei,Guangdong,Shenzhen and Chongqing.Based on this foundation,the government plans to integrate these 7 markets to form one national market in 2017.This paper uses empirical method of finance and combines with macroeconomic models to study the potential impact of the national carbon trading market.Meanwhile,it offers interpretation of the findings from the point of view of corporate demand of environmental protection.Before analyzing the impacts of carbon trading market,this paper illustrates that carbon trading mechanism is the optimal choice of our country under the current developing stage.Through demonstrating the trendline of CO2 emissions,the structure of energy consumption and the current condition of environmental governance,it clearly shows that the economic developing phase of China is behind the western developed countries.In the short run,it is not possible for us to apply the practice used by the developed countries to reduct CO2 emissions,which provided abundant financial subsides for development of the new energy industry and subsequently altered traditional coal-centered energy consumption structure.Moreover,since our environmental protection industry is still in its infancy and the environmental protection products are immature,companies are purchasing the environmental-protecting patents mostly from abroad.As a result,Chinese companies are facing the condition that their marginal environmental protection cost curve is steeper than the marginal revenue curve.When the penalty of imposed by environmental policy is not higher enough to promote investing in green manufacturing,the company would prefer to pay the penalty for the emission of pollution.So on the one hand the government should improve the intensity of environmental monitoring,on the other hand it should build a mechanism to optimize the cost for corporations to reduce emission and facilitate the companies to develop the awareness for low-carbon production and environmental protection.Carbon trading mechanism as a quantity control instrument has unique advantage when it is compared with the price control instrument,like carbon tax.For instance,Carbon trading market mechanism can to re-allocate emission allowances across the society,and optimizes the CO2 reduction cost among the different industries,which minimizes the total welfare loss to the society caused by CO2 emission reduction.Because carbon trading market has a clearly defined target for emission reduction,its effects are more significant than carbon tax.Meanwhile,the market mechanism is more flexible than price instrument when the macroeconomic environment changes.Last but not the least,GHGs reduction is a global issue and carbon market is the only way to allow the international cooperation in current world.Above all,carbon trading mechanism is the optimal reduction instrument under our current state an developing phase.Carbon trading price is an indicator of the vitality of the trading market.During the operation of the market,the fluctuation of carbon price not only reflects the condition of the trading market,but also is an indicators of the macroeconomics condition in the future.This paper simulates the price fluctuation through using time series model.The results of this simulation show that our carbon trading market has the characteristics of strong Leptokurtosis,fat-tail,heteroscedasticity and volatility clustering.These characters tell us that the traders on our carbon trading pilot market are still in the learning stage about how to adapt to market changes,and so they display a cautious investment attitude.In addition,this paper also use Monte-Carlo and MERGE model to forecast the trendline of carbon price.The forcasting results is an inverted U curve shown,which is in accordance with the characteristics of a mature carbon trading market,like EU ETS.Based on this finding and empirical evidence of mature carbon trading market,this paper offers the suggestions for the carbon price monitoring by the governmentAccording to the analysis of our trading pilot market described in the previous sections,this paper proposes a hybrid control policy,named "low carbon price-high carbon tax"mechanism,which include both carbon trading mechanism and carbon tax.Through amendment to the existing CGE model,the hybrid control instrument is built into the simulation model to simulate the impacts on the different industries.Firstly,the the inter-temporal analysis demonstrates that the hybrid instrument can create complementary effects.Through high penalty imposed by carbon tax,this mechanism can avoid the excessing emissions,and also can guarantee the normal production process of company through carbon trading mechanism.This result is accordance with the simulating results of MERGE model.Secondly,through analysis of the impacts on different industries,it is shown that the "low carbon price-high carbon tax" can create a significant restriction on the energy industries that use multiple dirty fossil fuel sources,such as chemistry industry and energy mining industry,etc.Meanwhile industries which only need single dirty fossil fuel source are not affected by the hybrid policy,like transportation and electricity.Based on these findings,the hybrid control policy proposed in this paper can exert significant influences on the high carbon-emitting and polluting industries and effectively promote companies awareness of energy consersvation and emission reduction.This hybrid policy also demonstrates that,the establishment of carbon trading mechanism should consider the differences in production processes of different industries and allocate appropriately the target for emission reduction.To fully demonstrating the impacts created by carbon trading market and formation process of the corporate demand of environmental protection,this paper not only illustrates the pressure of carbon reduction induced by carbon trading market on various industries from the macro level,but also provides the empirical evidences on the stock market's reaction to the disclosure of corporate environmental performance from the micro level.Because both the seven carbon trading pilot markets and several new environmental legislations were launched in 2013,2013 is a symbolic year for environmental policy formulation in our country.These legislations include the "Air Pollution Prevention and Control Action Plan" which intensified the air quality monitoring,and the new "law of environmental protection" which increases the penalty for excessive emission.Therefore,this paper uses Kernel Propensity Score Difference-in-Differences method to examine the effect created by the intensified environmental monitoring.The result shows that this policy effects significantly improved investors'attention on the environmental disclosures.This also proves that demand of environmental protection has already shaped among our companies.Overview,through using economic theory and empirical method,this paper comprehensively illustrates the influences of carbon trading market establishment,and the formation process of corporate demand of environmental protection.At the macro-level,this paper studies the impacts exerted on economics growth rate and different industries' production cost.At the micro level,it shows that intensified environmental monitoring has promoted the formation of corporate demand to build "green business image".This paper contributes in three aspects:Firstly,it simulates the trendlines of carbon trading by using the data of typical trading pilot market and MERGE model.Secondly,it also shows the effect of a hybrid carbon trading and taxation policy on different industries.Lastly,it uses empirical method to prove the shaping process of corporate demand for environmental protection. |
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