The effects of linking the EU and Chinese emissions trading systems
Loading...
URL
Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Unless otherwise stated, all rights belong to the author. You may download, display and print this publication for Your own personal use. Commercial use is prohibited.
Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
31 + 12
Series
Abstract
Both the EU and China have implemented an emissions trading system (ETS) to limit carbon emissions. This thesis reviews the literature on the welfare and emission effects of linking these two ETSs, meaning that emission permits from both systems can freely be traded and used for compliance in either system. Linking improves the efficiency of total abatement allocation by increasing cheaper abatement in China and reducing more expensive abatement in the EU. The revenues from permit trade compensate for China’s increased abatement costs. Based on the literature that uses computable general equilibrium (CGE) models to study this linkage scenario, the aggregate and EU welfare are improved by linking, whereas China faces more modest or even negative welfare effects. China can still be made better off by increasing its share of the total permit cap allocation. The welfare effects are also more equal if international trade is less restricted. The effect on total emissions is similarly unclear. Linking, limiting linking, and tightening the total cap when linking may all increase or decrease emissions through their effect on net carbon leakage. Linking may also decrease total emissions if it reduces China’s intensity-based permit allocation, but increase emissions if the usage of Chinese surplus permits is increased.Description
Thesis advisor
Vehviläinen, IivoKeywords
emissions trading, ETS linking, the EU, China, Paris agreement, NDC