FINAL ARTICLE
The Chinese National Carbon Trading Scheme is a scheme that the Chinese have developed in conjunction with cap and trade and the Kyoto Protocol that allows for an increase in green innovation and opportunity for creating a low carbon country with less administrative obstacles[i]. Emissions’ trading is seen as one of the best ways through which the environment can be saved. As trading emissions benefits organizations with incentives and open markets, which increase flexibility and avoids price shocks[ii]. This initiative has been in process since 2012 and was officially announced in 2014. This scheme allows provinces and businesses within China to earn money by investing in a carbon capture systems in regions that fail or cannot invest in green technology[iii].
In China, only 9.30% of companies showed strong willingness to partake in emissions trading schemes. Through analysis, it was proven that most companies were taking part in these schemes to get closer to the government rather than in an effort to mitigate greenhouse emissions[iv]. In 2011, the carbon prices plummeted sparking China to act, which started with a cap and trade model now morphing into the nation's new trading scheme. Creating a domestic demand and its own carbon market in an effort to regain control. The Chinese’s have stated that climate capitalism and its benefits create opportunity in the green age for businesses, which has been said to be better than democracy[v]. China has implemented incentives for businesses and companies that take part in this national trading scheme. Technological and monetary incentives are offered to help reduce the company’s carbon footprint and cost for green technology. There are also obstacles with this approach like insufficient expertise on some factions of the carbon market and the cost-benefit ratio[vi]. China launched with 7 carbon trading schemes to maximize the energy saving and carbon goals. These schemes allow for many types of companies and people to get involved on a national scale[vii]. In the early stages, the Chinese looked at liked interprovincial markets and separate provincial markets. The linked market can improve social welfare and decrease carbon emissions in not only provinces but also the nation. Subsequently, this same linked market has the potential of increasing inequality if used incorrectly[viii]. A big part of becoming a low carbon country is the investment in green technology, specifically wind power. In China, wind power is the largest low carbon energy, increasing in supply, which Chinese don’t want to go to waist[ix]. The Chinese’s have stated that climate capitalism and its benefits create opportunity in the green age for businesses, which has been said to be better than democracy.
Background
In the past 3 decades, financial market management in China has shown to be a learning curve. Market breakdowns, ineffective policy and irrational behaviour lead to some of Chinas biggest down falls and this need to be fixed for the sake of ETS. Shenzhen was the first major city where ETS was used and widely accepted. Due to this China allowed formal legislation for this city alone and through this they used it as a role model for ETS[x]. Emission trading has let the economic market put a price on the ability for an entity to emit greenhouse gasses into the atmosphere. This began to really show in China in the 1980’s in an effort to have reformed policy. China has seen many breakdowns in the economy since then and this has affected the longevity of the positives emission trading can bring. The most overwhelming failure was when the Circuit Breaker Mechanism introduced by the China Securitas Regulatory Commission in January 2016. This meant that trading between provinces in emission trading schemes (ETS) was delayed and the market forced to temporary closure. These issues raise concern with the growing carbon market in China as some of the main cities chosen to run ETS’s are at the forefront of these market crashes and could cause issues moving forward[xi].
Economics
Carbon Market and Trading Schemes
The Chinese government is trying to upgrade its provincial carbon trading schemes to a nationwide scheme. Energy saving and emission reduction is very important to China and there 25 year plan has been set. They are trialing this through 2 different market scenarios: linked interprovincial market and separate provincial market. These 2 scenarios were tried in the provinces of Hubei and Guangdong. The pilots that China has picked are responsible for the interprovincial trading markets[xii]. The linked market shows the benefits of combining domestic carbon market. It allows high economic efficiency and at lower costs and better welfare for the region. A foreseen obstacle through the linked market is equity. The welfare may be spread unequally across different regions meaning other regions gaining from the trading scheme than others. This was also the issue seen with spate carbon markets but when they compared the two the separate market had the same downfalls but with more gain in the end[xiii].
In conjunction with the 2 types of markets, China launched seven carbon-trading schemes within 7 regions in China. These regions were selected for a strategic reason as all the regions involved are at different stages of development, which can help in the design of the final national ETS. The schemes are similar but have different views on issues that need fixing like: coverage of sectors, allocation and allowances, price uncertainty, market stabilisation, potential market power, use of offsets, enforcement and compliance[xiv]. As this started in 2011 there have been some lessons learned that need to be attended to. Based on the 3% purchase of 350 tonnes of emission allowance only 178 out of 242 actually bought in and purchased their share. Another lesson learned here was in Shanghai where there was need for financial institutions to up their compliance rate. In a study done it was concluded that education, strict compliance rules, and financial aid are important to the start of this scheme. Furthermore, it suggested that the pilots showed be run with uniform standards for all the above listed. Until the nationwide scheme is up ad running strong by 2019 regions have to work hard in the existing regional ETS as if they don’t meet the nationwide ETS allowance they may not be let in[xv].
Incentives
There are 3 types of businesses that are participating in China’s ETS pilots. The first types are capped enterprises that have been allocated carbon emission allowances. The second types are the uncapped enterprises and are not covered by current ETS pilots. The third type involves the negotiators that give advice and services to the low-carbon initiatives. Through these businesses that are involved there are incentives that come with them. The first is the pressure to comply as the government argues that if your business participates in this you will help save the world for future generations. Another incentive was the ability for technological upgrades. If a business chose to partake in the ETS they would be getting an upgrade that would not only help their business but the environment[xvi]. Furthermore, in an uncapped enterprise there is an even bigger monetary gain for those businesses. Selling carbon related services are one of the largest money-maker’s in China. Businesses see that if they get into the ETS market quickly and make an impact, it will guarantee a competitive advantage in the market. Another incentive is government subsidies if businesses use better ways of disposal and cleaning of there factories. Lastly, the open market allows any and all businesses join in on the ETS to better the environment[xvii].
Wind Technology and Policy Measures
China has said they are expecting to reduce their greenhouse gas emission by 40-45% by the year 2020. A specific low carbon energy (LCE) is expected to play a huge part of this goal of reducing emissions. Wind power is the largest and key LCE in China, which can increase energy and reduce emissions. The Chinese government has taken large steps in promoting and acquiring wind technology for on and offshore wind turbines. As part of a policy, China split itself into 4 areas of wind resource, which allowed for a 0.098USD/kWh[xviii]. In addition to national policy, the international Clean Development Mechanism (CDM) has done a lot for the Chinese development by endorsing the sales of Certified Emissions Reductions (CER). Wind power still needs some work in China and feed-in-tariffs can fix as the electricity market in China cannot yet support wind power 100% yet. Policies that focus on increased grid use can help wind power and investments. Higher electricity prices are needed to increase the investment and availability for wind energy. Price ceilings may help ETS’s and are being looked at to help with the burden of high prices and political viability. Chinese ETS future and LCE like wind power is directly related to the evolution of carbon pricing. China still requires a lot of economic growth to get welfare levels that can compete with OECD countries[xix].
China National Climate Capitalism
In China, capitalism is seen as an integral part of national development. The public doesn’t see this capitalism as a crisis and the authoritarian state has shown its ability to curb pressures from international and domestic entities. The current state of development is far from where the state heads want to see it. What they think is missing is cap and trade and ethical validity. The strategic role in China is to have domestic carbon markets more prominent. Non-state entities want to follow these markets but have limited influence and availability in most aspects[xx]. Financial industry and consultations with business are limited and this is where state led capitalism comes in. They can take the ETS into there own hands and allow for everyone to buy in and have more say in some ways and allow for the ETS to finally start working. In China, the US style capitalism has been shunned and the implementation of state led capitalism is taking shape and being enforced. New ‘economic liberals’ are taking hold in China a realising that global power is in their hands and the economic welfare and market control can leave the West at China’s knees. Carbon trading can be seen as a strengthening market in has the ability to influence worldwide carbon pricing within the global carbon economy[xxi].
Obstacles and Criticisms
An obstacle that China faces is the theory of ‘low hanging fruit’ where the most cost effective ways of energy reduction are already maxed out. For example the thermal power industry where the only way it could get cleaner is through integrated gasification combined cycle. This is way to expensive to be compensated by an ETS program no matter the cost of carbon. The China Centre for Economic Research (CCER) can only off set allowances by 5-10% and this runs the risk of an oversupply of carbon credits, which could dilute the market. China’s environmental regulations are slacking and this is hindering the participation of companies in their schemes. They are worried about major fraud and weakness during the implementation stage[xxii]. Through the lack of policy companies see this as not legally binding if they join, which makes them feel vulnerable if something were to fall through. Also, there are some external pressures within the larger cities where companies feel pressured to partake in something they may not want to. Even though the Chinese are trying to mitigate the fluctuating carbon prices, the uncertainty of the prices has failed to promote some companies to upgrade[xxiii].
[i] Lee, T. (2016). CAP AND TRADE IN CHINA: ADVANTAGES OVER A CARBON TAX. University of Pennsylvania. https://publicpolicy.wharton.upenn.edu/live/news/1455-cap-and-trade-in-china-advantages-over-a-carbon/for-students/blog/news.php
[ii] Stavins, R. N. (2001). Experience with Market-Based Environmental Policy Instruments. SSRN Electronic Journal,01(58), 1-70.
[iii] Lee, T. (2016). CAP AND TRADE IN CHINA: ADVANTAGES OVER A CARBON TAX. University of Pennsylvania. <https://publicpolicy.wharton.upenn.edu/live/news/1455-cap-and-trade-in-china-advantages-over-a-carbon/for-students/blog/news.php>
[iv] Yang, L., Li, F., & Zhang, X. (2016). Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China. Energy Policy, 98, 254-265
[v] Lo, A. Y. (2014). National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geography and Economics, 56(2), 111-126.
[vi] Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
[vii] Zhang, Z. (2015). Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme. SSRN Electronic Journal, 15, 104-126
[viii] Liu, Y., Feng, S., Cai, S., Zhang, Y., Zhou, X., Chen, Y., & Chen, Z. (2013). Carbon emission trading system of China: a linked market vs. separated markets. Frontiers of Earth Science, 7(4), 465-479.
[ix] Mo, J., Agnolucci, P., Jiang, M., & Fan, Y. (2016). The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment. Energy Policy, 89, 271-283
[x] Yu, X., & Lo, A. Y. (2014). Carbon finance and the carbon market in China. Nature Climate Change,5(1), 15-16.
[xi] Cong, R., & Lo, A. Y. (2017). Emission trading and carbon market performance in Shenzhen, China. Applied Energy,193, 414-425.
[xii] Liu, Y., Feng, S., Cai, S., Zhang, Y., Zhou, X., Chen, Y., & Chen, Z. (2013). Carbon emission trading system of China: a linked market vs. separated markets. Frontiers of Earth Science, 7(4), 465-479
[xiii] Liu, Y., Feng, S., Cai, S., Zhang, Y., Zhou, X., Chen, Y., & Chen, Z. (2013). Carbon emission trading system of China: a linked market vs. separated markets. Frontiers of Earth Science, 7(4), 465-479
[xiv] Zhang, Z. (2015). Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme. SSRN Electronic Journal, 15, 104-126
[xv] Zhang, Z. (2015). Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme. SSRN Electronic Journal, 15, 104-126
[xvi] Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
[xvii] Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
[xviii] Mo, J., Agnolucci, P., Jiang, M., & Fan, Y. (2016). The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment. Energy Policy, 89, 271-283
[xix] Mo, J., Agnolucci, P., Jiang, M., & Fan, Y. (2016). The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment. Energy Policy, 89, 271-283
[xx] Lo, A. Y. (2014). National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geography and Economics, 56(2), 111-126.
[xxi] Lo, A. Y. (2014). National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geography and Economics, 56(2), 111-126.
[xxii] Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
[xxiii] Yang, L., Li, F., & Zhang, X. (2016). Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China. Energy Policy, 98, 254-265
Lead Section: Chinese National Carbon Trading Scheme
The Chinese National Carbon Trading Scheme is a scheme that the Chinese have developed in conjunction with cap and trade and the Kyoto Protocol that allows for an increase in green innovation and opportunity for creating a low carbon country with less administrative obstacles[i]. Emissions’ trading is seen as one of the best ways through which the environment can be saved. As trading emissions benefits organizations with incentives and open markets, which increase flexibility and avoids price shocks[ii]. This initiative has been in process since 2012 and was officially announced in 2014. This scheme allows provinces and businesses within China to earn money by investing in a carbon capture systems in regions that fail or cannot invest in green technology[iii].
In China, only 9.30% of companies showed strong willingness to partake in emissions trading schemes. Through analysis, it was proven that most companies were taking part in these schemes to get closer to the government rather than in an effort to mitigate greenhouse emissions[iv]. In 2011, the carbon prices plummeted sparking China to act, which started with a cap and trade model now morphing into the nation's new trading scheme. Creating a domestic demand and its own carbon market in an effort to regain control. The Chinese’s have stated that climate capitalism and its benefits create opportunity in the green age for businesses, which has been said to be better than democracy[v]. China has implemented incentives for businesses and companies that take part in this national trading scheme. Technological and monetary incentives are offered to help reduce the company’s carbon footprint and cost for green technology. There are also obstacles with this approach like insufficient expertise on some factions of the carbon market and the cost-benefit ratio[vi]. China launched with 7 carbon trading schemes to maximize the energy saving and carbon goals. These schemes allow for many types of companies and people to get involved on a national scale[vii]. In the early stages, the Chinese looked at liked interprovincial markets and separate provincial markets. The linked market can improve social welfare and decrease carbon emissions in not only provinces but also the nation. Subsequently, this same linked market has the potential of increasing inequality if used incorrectly[viii]. A big part of becoming a low carbon country is the investment in green technology, specifically wind power. In China, wind power is the largest low carbon energy, increasing in supply, which Chinese don’t want to go to waist[ix]. The Chinese’s have stated that climate capitalism and its benefits create opportunity in the green age for businesses, which has been said to be better than democracy[i]
[i] Lee, T. (2016). CAP AND TRADE IN CHINA: ADVANTAGES OVER A CARBON TAX. University of Pennsylvania. https://publicpolicy.wharton.upenn.edu/live/news/1455-cap-and-trade-in-china-advantages-over-a-carbon/for-students/blog/news.php
[ii] Stavins, R. N. (2001). Experience with Market-Based Environmental Policy Instruments. SSRN Electronic Journal,01(58), 1-70. doi:10.2139/ssrn.199848
[iii] Lee, T. (2016). CAP AND TRADE IN CHINA: ADVANTAGES OVER A CARBON TAX. University of Pennsylvania. <https://publicpolicy.wharton.upenn.edu/live/news/1455-cap-and-trade-in-china-advantages-over-a-carbon/for-students/blog/news.php>
[iv] Yang, L., Li, F., & Zhang, X. (2016). Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China. Energy Policy, 98, 254-265
[v] Lo, A. Y. (2014). National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geography and Economics, 56(2), 111-126.
[vi] Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
[vii] Zhang, Z. (2015). Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme. SSRN Electronic Journal, 15, 104-126
[viii] Liu, Y., Feng, S., Cai, S., Zhang, Y., Zhou, X., Chen, Y., & Chen, Z. (2013). Carbon emission trading system of China: a linked market vs. separated markets. Frontiers of Earth Science, 7(4), 465-479.
[ix] Mo, J., Agnolucci, P., Jiang, M., & Fan, Y. (2016). The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment. Energy Policy, 89, 271-283
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Article Outline: Contents
Background
Economics
- Carbon Market
- Trading Schemes
- Incentives
- Cost-Benefit
- Wind technology
Implementation in China
Chinese National Climate Capitalism
Criticisms
References
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Chinese National Carbon Trading Scheme Proposal
The Chinese national carbon-trading scheme is of vast importance in a global view. This topic is very significant as it will teach and spread awareness of more efficient trading schemes and green technology. This scheme is a development on top of the U.S. cap and trade policy, which has proved to lower pollution at a low cost. But, in comparison to the U.S. cap and trade policy, the Chinese carbon-trading scheme is more proficient at navigating administrative obstacles and advancing technological innovation. Emission trading in today’s society is seen as one of the best ways to save the environment. There are many benefits that emissions and carbon trading can bring, such as its low cost, ability to make businesses more sustainable and its open markets makes it less susceptible to economic collapse. China announced their trading scheme in 2014 while having factions working with this system since 2012. Just to show how fast and effective this scheme works the Chinese in 2015 declined coal emissions by 1.5% and grew the GDP 6.9% (Lee, 2016). With how China is making this system easy for the whole nation, it allows provinces that don’t invest in green technology to still earn money by investing in the carbon trade systems.
There is substantive evidence that this Wikipedia article has many gaps in information seeing how it only has 4 sentences. This article touches on the inauguration of the scheme and that there are some challenges, with no explanations or descriptions. After research into the topic I have compiled information pertinent to the topic that was not touched on in the original article. The Kyoto Protocol is a huge part of carbon trading at a global level and should not have been left out of the article. The difference between linked vs. separate provincial markets and which one is better and which one was used in China. How emission trading can deliver low carbon energy through lower costs and green technology. China is also looking into wind technology and investment schemes for those who are not excited by wind energy. The Chinese are also creating incentives and motivators for business to bite into the scheme to better the environment and country. With advantages come disadvantages and how they affect the everyday citizen and some businesses. Furthermore, the lack of some stakeholder presence and spotty political interest has impacted efficiency but is looking up. China implemented 7 schemes to try and include everyone and create the most benefit for the most people and environment. Looking at how the Chinese went from a pilot project to a nationwide scheme, where other countries can learn. Finally, explaining how Chinese’s climate capitalism benefits a lot of Chinese businesses, which has been said to be better than democracy. These facts and examples were left out of the original article, which will be examined and explained in the revising of the article.
In an effort to edit the article it was evident that there was little effort put into the creation. The sources used to cite the facts within the few sentences were all form non-academic articles. These sources could have been upgraded to academic sources, which are the best sources in this case because newspapers, organization websites and non-academic articles are all prone to different types of bias. There is no organization in the article as a lead section; headings and subheading are not present. In the reference list there are hyperlinks assigned to numbers, not properly cited or formatted reference list. A positive to the article is that very simple facts are presented for a brief understanding but more is still needed to really get a better understanding. The writing style and grammar is that of what is needed in a Wikipedia article, which is very to the point and doesn’t allow for run on sentences, clichés or fillers.
Through the points mentioned and the critiques made the revision of the article will have more pertinent and needed information for the pursuit of knowledge and understanding of the topic, Chinese national carbon trading schemes.
Works Cited^
Lee, T. (2016). CAP AND TRADE IN CHINA: ADVANTAGES OVER A CARBON TAX. University of Pennsylvania. <https://publicpolicy.wharton.upenn.edu/live/news/1455-cap-and-trade-in-china-advantages-over-a-carbon/for-students/blog/news.php>
Annotated Bibliography
Liu, Y., Feng, S., Cai, S., Zhang, Y., Zhou, X., Chen, Y., & Chen, Z. (2013). Carbon emission trading system of China: a linked market vs. separated markets. Frontiers of Earth Science, 7(4), 465-479.
This article compares linked provincial markets and separate provincial markets to see which one is best suited for China’s emission trading schemes. The study proved that linked provincial markets were better for the welfare of the people and reduced emissions. It was then concluded that this system will replace a top-down practice. This source will help show the readers the different strategies and techniques the Chinese used to get the best results. It will also give the reader a deeper understanding of the different markets and policy used by the Chinese in Emission trading.
Lo, A. Y. (2014). National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geography and Economics, 56(2), 111-126.
This article looks at how the Kyoto Protocol affected certain policies and pilots for the Chinese emission-trading scheme. Also, it looks at the prospects for global carbon trading when the Chinese announced they were going national. When the carbon prices plummeted in 2001 it shows what the Chinese did to remedy the situation. This article will help the reader understand the Kyoto Protocol and how emission trading is affected by it. The reader will be informed of how the Chinese acquired market power to gain a role in international climate politics.
Mo, J., Agnolucci, P., Jiang, M., & Fan, Y. (2016). The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment. Energy Policy, 89, 271-283.
This source looks at how Chinese carbon emission trade scheme (ETS) can deliver low carbon energy (LCE) in China. Also, looks at the options they have looked into such as wind and green technology. It will also reveal the policy measures needed for emission trading schemes in China. This source will allow the reader to understand the different technologies the Chinese are using to create a LCE and policy measures that need to be improved.
Shen, W. (2014). Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Climate Policy, 15(3), 339-354.
This source shows the reader the challenges Chinese businesses face while trying to or being forced to participate in emission trading schemes. Factors that encourage and discourage businesses to partake in the scheme. Furthermore, it shows how issues such as lack of stakeholder and spotty political interest impacts efficiency of the Chinese emission-trading scheme.
Yang, L., Li, F., & Zhang, X. (2016). Chinese companies’ awareness and perceptions of the Emissions Trading Scheme (ETS): Evidence from a national survey in China. Energy Policy, 98, 254-265.
This source shows how Chinese companies have reacted to the emission trading scheme and the issues they have with it. Issues such as external pressures and how the carbon prices fail to promote companies to upgrade. Instead of showing how the policy and government implement ETS, this source shows the reader how the public and companies are dealing and reacting to the Chinese emission trading schemes.
Zhang, Z. (2015). Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme. SSRN Electronic Journal, 15, 104-126
This source looks at the 7 carbon trading schemes China tried out. They looked at several possibilities to see which idea enables China to develop nationwide emission trading scheme with developing geographic coverage. This source will show the reader the trials the Chinese took to further China’s emission trading schemes for a nationwide system.
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