Yale School of Forestry & Environmental Studies
195 Prospect St.
New Haven, CT 06511
Institutional Affiliation: Yale School of Forestry & Environmental Studies
NBER Working Papers and Publications
|December 2019||China's Unconventional Nationwide CO2 Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy|
with Lawrence H. Goulder, Xianling Long, Richard D. Morgenstern: w26537
China is planning to implement the largest CO2 emissions trading system in the world. To reduce emissions, the system will be a tradable performance standard (TPS), an emissions pricing mechanism that differs significantly from the emissions pricing instruments used in other countries, such as cap and trade (C&T) and a carbon tax. We employ matching analytically and numerically solved models to assess the cost-effectiveness and distributional impacts of China’s forthcoming TPS for achieving CO2 emissions reductions from the power sector.
We find that the TPS’s implicit subsidy to electricity output has wide-ranging consequences for both cost-effectiveness and distribution. In terms of cost-effectiveness, the subsidy disadvantages the TPS relative to C&T by causing ...