Jingjing Jiang

Controlling GHG emissions from the transportation sector through an ETS: institutional arrangements in Shenzhen, China

Many different approaches are needed to achieve reductions in GHG emissions from the transportation sector. Carbon emissions trading schemes (ETSs) are widely used in industry and are effective in reducing the overall social cost of emissions abatement. This article reports the development of a downstream ETS for the transportation sector and its application in Shenzhen, China. The ETS was devised as a mandatory cap-and-trade scheme and, as a first step, was applied to public transportation. An integrated cap was set on the total emissions from buses and taxis: an absolute cap for existing vehicles and a relative increment for new entrants. Allowances were allocated by grandfathering or benchmarking and a ‘reverse mechanism’ was established to encourage the transformation of urban transportation to a low-carbon system. Online fuel consumption monitoring was used to quantify the emissions from vehicles, and the operators were required to surrender enough allowances or credits to account for their verified annual emissions. The mechanisms for allowance trading and carbon offsets provided sufficient flexibility to make emissions abatement and the use of new-energy vehicles and environmentally friendly travel within Shenzhens urban transportation system economically attractive. Policy relevance The transportation sector is becoming a major contributor to the growth in Chinas GHG emissions. Achieving large reductions in GHG emissions from the transportation sector is a great challenge and requires both technology and policy innovation. The tradable carbon permit is a popular concept in mitigating climate change, but the introduction of a cap-and-trade ETS into the transportation sector is a relatively innovative concept. Shenzhen has launched the first cap-and-trade ETS in a developing country and is currently exploring ways to mitigate carbon emissions by a downstream cap-and-trade ETS for the transportation sector. This article considers the main institutional arrangements and regulatory framework of Shenzhens transportation carbon ETS. It not only refreshes the theoretical analysis and practical application of downstream cap-and-trade carbon emissions trading in urban transportation, but also provides developing countries with a cost-effective instrument to mitigate their rapid growth in traffic carbon emissions during urbanization.

Interprovincial allocation of China's national carbon emission allowance: an uncertainty analysis based on Monte-Carlo simulations

Trade-offs between economic development and carbon emission reductions, as well as their uncertainties, are great challenges for climate change negotiations. This article focuses on the equality of Chinas national carbon allowance allocations for provincial economic development while taking into account the uncertainties in provincial economic output and business-as-usual carbon emission. The allocation equality assessment under an uncertainty model was developed based on the Gini coefficient of accumulated carbon emission per unit of gross domestic product (GDP) and Monte Carlo simulations. It was used to compare the equity and related provincial carbon abatement burdens between the grandfathering allocations under an absolute cap and the output-based benchmarking allocations under a relative cap. The results showed that the volatilities of national carbon abatement and accumulated carbon emission per unit of GDP were more stable under the relative cap. The benchmarking mechanism resulted in a more equitable allowance allocations for provincial economic development and mitigated shocks in provincial output volatility to the equity of national overall allowance allocations. This mechanism was expected to produce a more evenly distributed carbon abatement burden-sharing across provinces, and to reduce the uncertainties of provincial carbon abatements. The benchmarking mechanism is thus proposed as an appropriate choice for Chinas current equitable provincial carbon allowance allocations. Policy relevance The trade-off between economic development and carbon emission reduction is the most controversial issue in climate change negotiations. The uncertainties in economic outputs and carbon emission also pose great challenges. With the obvious imbalance and uncertainty in provincial developments, the equitable allocation of carbon allowances among provinces is the key for China to develop a national carbon emission trading scheme. The comparison of allocation mechanisms under uncertainty provides more practical suggestions for policy making in China. Benchmarking results in more equitable allowance allocation and yields more even and stable abatement burden-sharing across provinces. It narrows the gaps in economic development emissions rights between developed and less developed provinces, and mitigates the shocks of provincial outputs and business-as-usual emissions to the overall allocation equity and provincial carbon abatement burdens. This benchmarking is suggested as a reasonable choice for Chinas provincial carbon allowance allocation method.

Dynamic Nonlinear Relationships between Carbon Emission Allowance and Reduction Credit Markets-Based on the IRF-DCC Model

Emission trading and market mechanism have increasingly become crucial policy measures to promote sustainable development. Coupled with carbon emission reduction credit trading, carbon emission allowance trading under the cap-and-trade scheme is also steadily developing in China. To learn from the EU ETS’s experience, the paper applied the IRF-DCC model to explore the dynamic nonlinear relations between EUA and CER markets. Empirical results indicate that EUA and CER are dynamically and conditionally correlated both in the spot and future markets. Correlations of spot volatilities are highly instable and market dependent while correlations of future volatilities are relatively stable and independent.