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Imperfect (Re)allocation in Imperfect Markets: Evidence from China’s Pilot Carbon ETS

27 marzo 2024
2:00 pm
San Francesco Complex - classroom 1

We evaluate the effectiveness of both absolute and intensity emission regulations in the Chinese carbon emission trading scheme (ETS) pilots that were established in 2013. The coexistence of two types of regulation within a single energy market provides a unique opportunity to study their differential effects on the magnitude and nature of emission reductions. We employ a difference-in-differences estimation strategy to examine the behavior of various market participants on all potential margins of adjustment, including energy consumption, industrial output, electricity trade, and substitution between power sources. We find that both types of regulation induce carbon mitigation, but that they come with distinct tradeoffs. Our results indicate that an aggregate annual reduction equivalent to an energy consumption of 7.5 and 8.7 million tons of standard coal can be attributed to the absolute and intensity-type emission regulations, respectively. This amounts to 9% and 23% of yearly energy consumption covered by the schemes.


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Jo Van Biesebroeck, KU Leuven