Policy Design And Carbon Trading Market Performance

Facing the carbon abatement pressures from home and abroad,the Chinese government officially declared to control emissions of GHG(Green House Gas,GHG)and formulate carbon abatement targets until 2020.During the 11th Five-Year,carbon emissions reduction mainly depended on command and control policies such as shutting down and eliminating industrial enterprises,which achieved reduction goals in the short term.But it has a negative impact on the economy and is not conducive to long-term carbon emissions reduction and the adjustment of energy structure.Carbon emissions trading as a cost-effective emission reduction tool has been widely concerned.In 2011,China established seven pilots to explore carbon emissions trading markets Although most firms in pilots have achieved their reduction goal,trading volumes are relatively small,and some trading markets are almost stagnant and market activity is low.Policy design plays an important role in the emissions trading market performance Designing reasonable initial allocation,trading range in time and space and offset mechanism can save abatement costs and increase social benefits.At present,China is in the pilot phase of carbon emissions trading,and will establish national carbon emissions trading market in the end of 2017.Therefore,it is essential to study policy design of carbon emission trading market to provide theoretical and technical support for the development and optimization of national carbon trading market.Power industry accounts for more than 40%of the total carbon dioxide emissions,which is the main contributor and the key industry during the construction of a unified national carbon trading market.Therefore,this study selected electric power industry as the research object.Agent-based model was used to analyze the effect of carbon trading market on economic performance of power enterprises from the micro perspective,discuss the mechanism of policy design to influence power enterprises in the market,and further assess operational performance of the carbon trading market from the macro system.Based on above research ideas,we first constructed carbon emissions trading market in power industry and determined trading market rules.Bilateral negotiation is adopted as transactional model.Combined with Netlogo simulation platform and trading rules,we constructed simulation system of carbon emissions trading market The 928 thermal power plants were agents in this simulation system.The results found carbon emissions trading policy can optimize resources allocation and increase overall profits.The developed areas with high generation profits mainly rely on generating electricity to increase profits,concentrated in Jiangsu,Zhejiang,Shanghai and Guangdong.The areas with lower generation profits reduce electricity generation and sell surplus quotas to increase revenue.Carbon emissions trading realized quotas shifting from power plants with low marginal generation profits to ones with high marginal generation profits,ensuring that generation profits increase in the power industry.Emissions trading market can decease pollutants emissions and produce national health co-benefits.Air pollutants emissions pattern change in different areas after trading,which lead to different health co-benefits in different areas due to population density and economic income level.Guangdong,Hunan and other regions with higher generation profits would increase generation capacity and air pollution emissions,further bring health damage to these areas.But the areas with lower generation profit would reduce generations and increase health co-benefits.Through implementing carbon emissions trading,generation revenue increase 3.69%,CO2 emissions reduce 27.98%,PM2.5 emissions decrease 1.55 million tons.Carbon emissions trading reduce about 45200 cases of acute and chronic death and bring 51.53 billion CNY health benefits,which account for 0.09%of gross domestic product(GDP).Designing appropriate trading ratio,choosing suitable transactions range or adopting strict regulation measures as auxiliary way may reduce health damages caused by redistribution of pollutants emissions.From the view of initial emission allocation design,the baseline method sets stricter cap relative to the other two grandfather methods,followed by historical emissions and historical output methods.Generation profits increase before and after trading have little difference in these three allocation designs.The baseline method leads to lowest generation profits increase compared with no cap and trade policy and brings health co-benefits.However,the method based on historical output results in health damages.As to trading market size,nationwide trading market produces the highest trading volume and generation profits comparing with trading confined in provinces and areas.Expanding transaction scopes may increase participants,promote trading market activity and increase market performance,but also lead to lower public health benefits.The health benefits decrease as the trading market scopes increaseVoluntary emission reduction market provides an effective supplement to the carbon emissions trading market.The price of CCER(Chinese Certified Emission Reduction)is lower than that of quota,so most plants buy CCER from market to increase their generation profits.Trading market with fixed maximum amounts of CCER offset would increase overall generation profits,but ones with fluctuant maximum amounts of CCER offset may decrease generation profits in comparison with market without offset mechanism.Different offset mechanism has little effect on profits and emissions in the areas of power plants with higher marginal profit,but has significant effects on profits and emissions in the areas of power plants with lower marginal profit.Comparing with carbon trading market without offset,bringing in offset can decrease the whole healthy benefits.