Reduction Effect Of Carbon Intensity Under Command-and-control Regulation And Tradable Permits Regulation

For the increasingly grim situation of global warming, the Chinese governmentmakes a commitment in2009, which will make the carbon intensity of China declinedbetween40and50percent from2005to2020. Later on China’s12th Five-year Planclaims that the carbon intensity of China to decline15%by2015, and the Chinesegovernment divide the overall target into provincial targets. Obviously, in thepromotion of environmental performance evaluation mechanism, making a properchoice of emission-cutting policies is a great economic and environmental problem.Generally speaking, there are two types of policy instruments to reduce carbonemissions, the one is administrative instrument and the other is market-basedinstrument. It is an effective choice of the policy to consider the core issue of thecarbon intensity reduction in environmental and economic development amongprovinces rather than the preference of government or enterprises. In other words, thereasonable choice, depending on which one will better reduce the carbon intensity.Firstly, based on this goal, the paper adopts a general method of energyconsumption to estimate the carbon intensity of30provinces from2000to2012. Weanalyze the panel data in the horizontal way and the longitudinal way and find that thetask of carbon intensity reduction achieved remarkable results. However, the result isbased on the heavier weight of developed regions which hinder the fragile ecologicalenvironment of distressed regions. Thus, carbon intensity reduction remains anarduous task.Then, this paper applies the theory of environmental production function todesign potential output models by the simulation of command-and-control regulationand tradable permits regulation. Accordingly, it evaluates the reduction effect of oureconomy under different regulations. We find that regardless of the regulatory environment carbon emissions in China showed a declining trend overall. Comparedto a command-and-control regulatory environment, the tradable permits regulationmodel promotes more green-tech innovation of emitters under the binding targets ofenergy-saving emission reduction, which causes carbon excess and the market cannotclear. So this regulation produces better reduction effect, which not only increasespotential output, also reduces carbon emissions. Further research shows that althoughreal-time tradable permits regulations can reduce emissions in China overall, it isunable to ensure that emissions decrease for every province. The carbon intensity intraditional energy-intensive provinces of Shanxi, Shaanxi, and Inner Mongoliadecreases quickly, which always choose to sell excess carbon emissions allowances.Whereas the provinces of Hubei, Hunan, Sichuan and Qinghai instead show carbonemissions increases under the tradable permits regulatory environment. On the onehand, because of the relatively little carbon emissions allowances these areas can onlybuy allowances in the market. On the other hand, the major reason is lack of theability of energy-saving and emission-reduction green-tech innovation. Of course, thisconclusion is based on the assumption that the historical carbon emissions distributionis “fair”.