impact of carbon trading on regulated agents in China

Facing requirements of sustainable development and tremendous international pressures, China has initiated a serious of trials for mandatory carbon trading schemes. In this study, to investigate the impact of carbon trading on commodity prices, emissions, outputs and profits of the regulated agents...

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Bibliographic Details
Published in:Mitigation and adaptation strategies for global change 2016-03, Vol.21 (3), p.377-390
Main Authors: Zhou, Yu, Fan, Jin, Zhao, Dingtao, Wang, Shanyong
Format: Article
Language:English
Subjects:
Atmospheric Sciences
Carbon
carbon markets
Clean technology
Climate change
Climate Change Management and Policy
Coal
Commodities
commodity prices
Compliance
Developing countries
Earth and Environmental Science
Earth Sciences
Electric power generation
Electricity
electricity costs
emissions
Emissions control
Emissions trading
Environmental economics
Environmental Management
global change
Industrial plant emissions
Industrialized nations
LDCs
market prices
oligopoly
Original Article
Pilot projects
Power plants
Prices
Profits
profits and margins
Sustainable development
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Summary:Facing requirements of sustainable development and tremendous international pressures, China has initiated a serious of trials for mandatory carbon trading schemes. In this study, to investigate the impact of carbon trading on commodity prices, emissions, outputs and profits of the regulated agents such as power plants in China, a partial equilibrium model is constructed based on the Cournot theory of oligopoly. Three key results were found. First, following the implementation of a carbon trading scheme there is a shift of production from plants with high emission rates to those with low rates. Second, the emission-based updating (EBU) allocation of allowable emissions would provide a buffer in which the reduced outputs and profits of plants with high emissions are alleviated. Third, if the electricity price is market oriented it will vary with the carbon price. Based on these results, we conclude that the carbon constraint will result in cleaner generating technologies and be helpful in promoting the development of low carbon technologies in China. In addition, the EBU allocation is more feasible at the beginning of the national carbon trading in China. Given that electricity prices in China are regulated now, we argue that mandatory carbon trading should be implemented at the beginning of coordinated reforms of market-oriented pricing in electricity.
ISSN:1381-2386
1573-1596
DOI:10.1007/s11027-014-9604-1