1. 1. Institute of Policy and Management, Chinese Academy of Sciences, Beijing 100190, China; 2. 2. Crawford School of Public Policy, Australian National University, Canberra ACT 0200, Australia; 3. 3. National Development and Research Commission, State Information Centre, Beijing 100045, China; 4. 4. Sun Yet-Sen Business School, Sun Yet-Sen University, Guangzhou 510275, China; 5. 5. School of Economics, Renmin University of China, Beijing 100872, China
The Chinese government intends to upgrade its current provincial carbon emission trading pilots to a nationwide scheme by 2015. This study investigates two of scenarios: separated provincial markets and a linked inter-provincial market. The carbon abatement effects of separated and linked markets are compared using two pilot provinces of Hubei and Guangdong based on a computable general equilibrium model termed SinoTERMCo2. Simulation results show that the linked market can improve social welfare and reduce carbon emission intensity for the nation as well as for the Hubei-Guangdong bloc compared to the separated market. However, the combined system also distributes welfare more unevenly and thus increases social inequity. On the policy ground, the current results suggest that a well-constructed, nationwide carbon market complemented with adequate welfare transfer policies can be employed to replace the current top-down abatement target disaggregation practice.
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