Opportunity and marginal abatement cost savings from China's pilot carbon emissions permit trading system: Simulating evidence from the industrial sectors.

China has launched pilot carbon emissions permit trading schemes (ETS) in seven regions since 2013/2014 and has established a nationwide ETS in the power industry by the end of 2017. Recent literature has evaluated China's seven pilot regions on design aspects of the ETS, and yet little is known about the potential recovery of economic output loss through introducing the ETS. This study considers the recovery of industrial value added loss and thus measures the abatement cost savings from trading to evaluate the necessity and feasibility of China's pilot ETSs. The analysis develops a parametric and nonparametric combined technique to calculate the opportunity abatement cost savings (i.e., potential abatement cost savings and unrealized abatement cost savings) and marginal abatement cost savings (i.e., changes on carbon shadow prices) in China's pilot ETSs during 2011-2015. It additionally provides an estimation of potential carbon emissions reduction from ETS. Both cross-industrial trading and intertemporal trading are considered, and three simulations, defined as no trading, cross-industrial trading, and cross-industrial and intertemporal trading, are conducted. We found that, i) 1-16% potential abatement cost savings and 2-12% unrealized abatement cost savings would be identified in China's pilot ETS regions. ii) 0.5-33% and 1.6-25% carbon emissions reduction potential would be realized respectively by introducing ETS and eliminating the operational inefficiency of the ETS. iii) Marginal abatement cost savings would both exist in almost all regions if the ETS were implemented and if the ETS were fully operational.

Forecasting the energy demand and CO2 emissions of industrial sectors in China's Beijing-Tianjin-Hebei region under energy transition.

As the world's greatest energy consumer, China's energy consumption and transition have become a focus of attention. The most significant location for regional integration in the north of China is the Beijing-Tianjin-Hebei region, where the industrial sector dominates its energy consumption. Forecasting the energy demand and structure of industrial sectors in China's Beijing-Tianjin-Hebei region may help to promote the energy transition and CO2 emission mitigation. This study conducts a model based on the year 2020 using the Long-Range Energy Alternatives Planning System (LEAP) software and sets two scenarios (baseline scenario and emission peak scenario) to forecast the future energy demand and CO2 emissions of industrial sectors in China's Beijing-Tianjin-Hebei region until the year 2035. Moreover, the industrial sectors are classified into traditional high-energy-consuming industries, emerging manufacturing industries, daily-related light industries, and other industries. The forecasting results show that (1) The industrial energy demand of the entire Beijing-Tianjin-Hebei region will grow from 234 Mtce in 2020 to 317 Mtce in 2035, and the corresponding energy structure will shift from coal-based to electricity-based; (2) at the provincial level, all three provinces will experience an increase in industrial energy demand between 2020 and 2035, with Hebei experiencing the fastest average annual growth rate of 2.18% and the largest share of over 80%, and Beijing experiencing the highest average annual electrification rate of 70%; (3) at the industrial sector level, the electricity and natural gas will gradually replace other energy sources as the main energy source for industry. The most representative industrial sub-sector in Beijing, Tianjin, and Hebei provinces are all traditional high-energy-consuming industries, which will account for more than 90% of the total energy demand in both Tianjin and Hebei by 2035.

Optimizing the rolling out plan of China's carbon market.

Although China has developed the world's largest carbon emissions trading scheme (ETS), there is no official documentation explaining how the current sectoral coverage plan was determined and what sectoral rollout plan is preferred. Here, we contribute to the policy development of the world's largest carbon market by suggesting a priority list of industries be covered in the ETS. We estimated marginal abatement cost curves using a database of more than two million firms covering over 500 four-digit industries that account for more than 97% of total industrial emissions, and simulating various carbon market scenarios including thermal power, 13 designated, and an additional 50 industries that have high emissions or are covered in other ETSs. Our analysis suggests that the cement industry should be the next sector to be included in China's ETS. In our revised list, the average abatement cost can be reduced by 39.5-78.3% compared with the business-as-usual scenario.