TY  - BOOK
AU  - Goulder,Lawrence H.
AU  - Long,Xianling
AU  - Lu,Jieyi
AU  - Morgenstern,Richard D.
ED  - National Bureau of Economic Research.
TI  - China's Unconventional Nationwide CO<sub>2</sub> Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy 
T2  - NBER working paper series
PY  - 2019///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - December 2019; Hardcopy version available to institutional subscribers
N2  - China is planning to implement the largest CO<sub>2</sub> 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 CO<sub>2</sub> 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 power plants to make less efficient use of output-reduction as a way of reducing emissions (indeed, it induces some generators to increase output) and by limiting the cost-reducing potential of allowance trading.  In our central case simulations, TPS's overall costs are about 47 percent higher than under C&T.  At the same time, the TPS has distribution-related attractions.  Through the use of multiple benchmarks (maximal emission-output ratios consistent with compliance), it can serve distributional objectives.  And because it yields smaller increases in electricity prices than a comparable C&T system, it implies less international emissions leakage
UR  - https://www.nber.org/papers/w26537
UR  - http://dx.doi.org/10.3386/w26537
ER  -