Research On Policy Issues Of China’s Carbon Trading Market From The Perspective Of Policy Pilot

Since entering the 21st century,the international community has adopted bilateral or multilateral cooperation to deal with climate change and set corresponding climate policy goals.In order to strengthen international cooperation,countries around the world signed the Paris Agreement in 2016.As the third milestone in the history of mankind to deal with climate change,the implementation of the"Paris Agreement" reflects fairness,"common but differentiated responsibilities",taking into account different national conditions,in line with the "national independent decision" arrangement.In its carbon emission reduction policy,China has committed to peaking carbon dioxide emissions around 2030,and carbon dioxide emissions per unit of GDP will fall by 60%-65%compared with 2005.In order to achieve this goal,On the one hand,China has formulated an industrial investment policy based on old infrastructure and incremental new infrastructure to promote the low-carbon and efficient transformation and upgrading of the overall industrial structure,and on the other hand,is actively exploring the use of market-oriented policies to achieve efficient emission reductions.Since the reform and opening-up,China has made remarkable achievements in economic and social development with a model that is different from traditional political system decision-making.China’s unique policy-making process is also called a "policy pilot" by experts and scholars.The innovation of policy pilots enables China to effectively reduce trial-and-error costs and accumulate practical experience when implementing new policies,thereby efficiently applying effective experience to various fields.In 2011,China approved the establishment of carbon trading markets in "two provinces and five cities." In the following two years,carbon markets in these seven pilot regions were put into operation,which marked China’s move to using market-based mechanisms to control carbon emissions.As the demonstrative effect of the carbon market expands,other provinces and cities have begun to establish their own regional carbon markets.The establishment of a unified national carbon market has also been incorporated into China’s 13th Five-Year Plan.The design of carbon market policy pilots mainly revolves around three modules:(1)The top-level design of the policy pilot.Formulate and promulgate the upper-level law of the carbon trading market to clarify its legal status.(2)Coverage of policy pilot.Determine the specific industries and enterprises regulated by the carbon trading system.(3)Implementation policy.The carbon trading market implementation policy includes monitoring,reporting and verification(MRV),allowance allocation methods and trading rules.MRV is the guaranteeing link for the smooth operation of the carbon trading system.According to the differences of the industry itself,the proportion and specific calculation method of the paid and unpaid allocation of quota are clarified.In the existing carbon market research,few studies focus on the elements of the carbon market from the perspective of carbon market coverage.The design of the carbon market coverage reflects the government’s positioning of the carbon trading system in the overall emission reduction action.It should not only consider the market’s stable and effective operation,the effectiveness of the management’s emission reduction costs,and the feasibility of emission reduction technology,but also balance emission reduction targets and economic growth.Therefore,this paper focuses on the coverage of the carbon market and the evaluation of the effects of pilot policies,and studies the following issues:First,the theoretical analysis covers the carbon market coverage model based on two dimensions:extent and depth of coverage.There are three options for extent coverage,namely upstream coverage,downstream coverage and composite coverage.Among them,upstream coverage can achieve full coverage of emission sources and manageable regulatory costs.However,its disadvantage is that upstream coverage can guarantee the stable and effective operation of the carbon market only in economies,in which sufficient energy price transmission mechanism exists;the downstream coverage method can directly cover the emission sources,but with the major disadvantage of difficulty in controlling regulatory costs,since the emission sources are widely distributed;Composite coverage method combines the advantages of the above two methods and avoids their disadvantages,but it is necessary to avoid double regulation of emission sources during the implementation of the composite coverage method.The depth of coverage mainly determines the specific coverage industry and its corresponding industry coverage threshold to determine the specifically regulated subjects.According to the micro-subject model developed in this paper:under the basic assumption,downstream coverage is more conducive to incentivizing carbon emission entities to implement emission reducing measures from raw materials to the terminal;In the macro-subject model,comparing to limiting the inter-provincial trading of emission quota,when they can be freely traded across provinces,no matter how the carbon price fluctuates,the total provincial emission reduction costs always fall.Secondly,a compilation of the policy documents related to the carbon market issued by China’s relevant government agencies since 2014 was given,then the current progress of the construction of a unified national carbon market was expounded in accordance with the basic elements of carbon market construction.The paper then measures and calculates the emission structure characteristics and emission efficiency distribution of various provinces,regions,and industries in China,from the standpoints of both region and industry.From the perspective of provincial carbon productivity,the three provinces(cities),Beijing,Shanghai,and Guangdong performed the best in 2012,all of which exceeded 0.70(10,000 yuan/ton of carbon).In terms of carbon productivity in the industrial sector,the tobacco production,instrument manufacturing,and 3C manufacturing ranks in the top three.The economic and industrial structure has led to differences in the coverage of carbon markets in pilot provinces and cities.Beijing and Shenzhen mainly cover the tertiary industry,including service-oriented units,construction facilities,high-tech,and advanced manufacturing enterprises.Other pilot carbon markets mainly cover high-energy-consuming and high-emission industries in the secondary industry,such as electricity generation,cement and building materials,chemicals,and steel industries.Shenzhen and Shanghai also include mobile sources,such as air and road transportation.In terms of the volume of markets,Hubei and Guangdong are largest,while Chongqing,Fujian and Tianjin have relatively low volumes.The difference in volume and price of the different pilot carbon markets is not only due to the differences in the total carbon market quotas and industry allocation methods in various regions,but also related to the coverage and the threshold for companies in specific industries.Thirdly,taking the Hubei carbon market as an example,the operation trend of China’s pilot carbon market is analyzed,and the cement industry is selected as the subject to explain the impact of carbon trading on the development of the industry.Huaxin Cement is selected as the standpoint,from which,emission reduction and economic effects achieved by the carbon market regulation process is analyzed.Then,the impact of carbon trading pilot policies on industrial carbon dioxide emissions and industrial output value was studied.Based on the data from the industries of 30 provinces and regions in China from 2009 to 2017,a benchmark measurement model was built with the help of the difference-in-differences(DID)method.The impact of the pilot carbon trading policy on gross industrial output value coincides with the common trend hypothesis,while the impact on industrial CO2 emissions and industrial unit gross output CO2 emissions does not.From the perspective of mechanism analysis,the carbon trading pilot policy has no significant impact on industrial carbon emission density,but it has a significant negative impact on industrial energy intensity,which shows that the carbon trading pilot policy will reduce industrial CO2 emissions by improving energy utilization technologiesThen a theoretical analysis of policy implementation and implementation effects in foreign carbon trading markets was present.the international carbon market typified by the EU Carbon Emissions Trading System,the national carbon markets typified by New Zealand,the state-level regional carbon markets typified by the California Total Volume Trading Scheme,and the city-level regional carbon markets typified by Tokyo Carbon Market are well established.Comparing the coverage methods of these different levels of carbon markets adopt,it is found that the choice of coverage methods needs to comprehensively consider factors such as the industrial structure,energy supply and demand status,and price formation mechanism of the country or region where the market is located.This not only helps the carbon market to operate smoothly.It is more conducive to expanding the economic benefits and environmental effects of the carbon market.Then,the shortcomings of China’s carbon market policies were explained from three aspects,and six targeted suggestions were proposed.Finally,based on the research of this paper,policy recommendations are given on the carbon market coverage model and depth of coverage,to further improve the carbon market mechanism and ensure its smooth operation.