Establishing National Carbon Emission Prices for China

Tinbergen Institute Discussion Paper 2018-028/III

59 Pages Posted: 9 Apr 2018

See all articles by Chia-Lin Chang

Chia-Lin Chang

National Chung Hsing University - Department of Applied Economics, Department of Finance

Te-Ke Mai

National Tsing Hua University

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute; Tinbergen Institute; University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Date Written: March 30, 2018

Abstract

The purpose of the paper is to establish national carbon emissions prices for the People’s Republic of China, which is one of the world’s largest producers of carbon emissions. Several measures have been undertaken to address climate change in China, including the establishment of a carbon trading system. Since 2013, eight regional carbon emissions markets have been established, namely Beijing, Shanghai, Guangdong, Shenzhen, Tianjin, Chongqing, Hubei and Fujian. The Central Government announced a national carbon emissions market, with power generation as the first industry to be considered. However, as carbon emissions prices in the eight regional markets are very different, for a variety of administrative reasons, it is essential to create a procedure for establishing a national carbon emissions price. The regional markets are pioneers, and their experience will play important roles in establishing a national carbon emissions market, with national prices based on regional prices, turnovers and volumes. The paper considers two sources of regional data for China’s carbon allowances, which are based on primary and secondary data sources, and compares their relative strengths and weaknesses. The paper establishes national carbon emissions prices based on the primary and secondary regional prices, for the first time, and compares both national prices and regional prices against each other. The carbon emission prices in Hubei, Guangdong, Shenzhen and Tianjin are highly correlated with the national prices based on the primary and secondary sources. Establishing national carbon emissions prices should be very helpful for the national carbon emissions market that is under construction in China, as well as for other regions and countries worldwide.

Keywords: Pricing Chinese Carbon Emissions, National Pricing Policy, Energy, Volatility, Energy Finance, Provincial Decisions

JEL Classification: C22, C58, G12, Q35, Q48

Suggested Citation

Chang, Chia-Lin and Mai, Te-Ke and McAleer, Michael, Establishing National Carbon Emission Prices for China (March 30, 2018). Tinbergen Institute Discussion Paper 2018-028/III, Available at SSRN: https://ssrn.com/abstract=3152795 or http://dx.doi.org/10.2139/ssrn.3152795

Chia-Lin Chang (Contact Author)

National Chung Hsing University - Department of Applied Economics, Department of Finance ( email )

Taichung, Taiwan
China

Te-Ke Mai

National Tsing Hua University ( email )

No. 101, Section 2, Guangfu Road, East District
Hsin Chu 3, 300
China

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute ( email )

Rotterdam
Netherlands

Tinbergen Institute

Rotterdam
Netherlands

University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Tokyo
Japan

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