Search Results (87)

This paper examines the changing role of emissions trading systems (ETSs) within the macro-financial framework of energy markets, emphasizing price dynamics and systemic spillovers. Utilizing monthly data from seven ETS jurisdictions spanning January 2021 to December 2024 (N = 287 observations after log transformation and first differencing), which includes four auction-based markets (United States, Canada, United Kingdom, South Korea), two secondary markets (China, New Zealand), and a government-set fixed-price scheme (Germany), this research estimates a panel vector autoregression (PVAR) employing a Common Correlated Effects (CCE) model and augments it with machine learning analysis utilizing XGBoost and explainable AI methodologies. The PVAR-CEE reveals numerous unexpected findings related to carbon markets: ETS returns exhibit persistence with an autoregressive coefficient of −0.137 after a four-month lag, while increasing inflation results in rising ETS after the same period. Furthermore, ETSs generate spillover effects in the real economy, as elevated ETSs today forecast a 0.125-point reduction in unemployment one month later and a 0.0173 increase in inflation after two months. Impulse response analysis indicates that exogenous shocks, including Brent oil prices, policy uncertainty, and financial volatility, are swiftly assimilated by ETS pricing, with effects dissipating completely within three to eight months. XGBoost models ascertain that policy uncertainty and Brent oil prices are the most significant predictors of one-month-ahead ETSs, whereas ESG factors are relevant only beyond certain thresholds and in conditions of low policy uncertainty. These findings establish ETS markets as dynamic transmitters of macroeconomic signals, influencing energy management, labor changes, and sustainable finance under carbon pricing frameworks. Full article

This study explores how carbon pricing and electricity market liberalization jointly contribute to China’s sustainable energy transition. Using a dynamic computable general equilibrium (CGE) model (CEEEA2.0), we simulate three policy scenarios—business as usual, emissions trading scheme (ETS) with regulated electricity prices, and ETS with market-based pricing—under a unified emissions cap. The results demonstrate that electricity market liberalization enhances carbon pricing efficiency by eliminating price distortions, leading to a 0.06% increase in GDP and a 12% reduction in emission abatement costs. However, liberalization also raises electricity and consumer prices, disproportionately affecting rural and low-income households. These findings underscore the need to balance economic efficiency and social equity in sustainability-oriented energy reforms. Our analysis emphasizes the importance of designing inclusive and just transition policies to ensure that carbon mitigation efforts support long-term environmental, economic, and social sustainability goals. Full article

New Zealand’s Emissions Trading Scheme (ETS) enables growers to earn payments by accumulating carbon units as their forests increase in carbon stock. For forests of less than 100 hectares, growers use predefined lookup tables (LUTs) to estimate carbon stock changes based on forest age. Using a combination of growth models and productivity surfaces, underpinned by data from 1360 growth plots, the objective of this study was to provide draft updates for the Exotic Hardwoods LUTs. The updated LUTs were based on growth rates of three Eucalyptus species, E. fastigata, E. regnans, and E. nitens, which comprise a major proportion of the Exotic Hardwoods forest type in New Zealand. Carbon tables were first derived for each species. Then, a draft LUT was generated for New Zealand’s North Island, using a weighted average of the species-specific tables based on the relative importance of the species, while the E. nitens table was used for the South Island where this is the predominant Eucalyptus species. Carbon stock predictions at ages 30 and 50 years were 820 and 1340 tonnes CO₂ ha⁻¹ for the North Island, and slightly higher at 958 and 1609 tonnes CO₂ ha⁻¹ for the South Island. Regional variation was significant, with the highest predicted carbon in Southland (1691 tonnes CO₂ ha⁻¹ at age 50) and lowest in Hawke’s Bay/Southern North Island (1292 tonnes CO₂ ha⁻¹). Predictions closely matched the current Exotic Hardwood LUT to age 20 years but exceeded it by up to 45% at age 35. Growth and carbon sequestration rates were similar to other established Eucalyptus species and slightly higher than Acacia species, though further research is recommended. These findings suggest that the three Eucalyptus species studied here could serve as the default species for a revised Exotic Hardwoods LUT and that the current national tables could be regionalised. However, the government may consider factors other than the technical considerations outlined here when updating the LUTs. Full article

Assessing the environmental and economic impacts of the carbon emissions trading scheme (ETS) is both timely and essential. This study investigates the effects of the ETS on energy transition by analyzing panel data from 30 provinces and municipalities across mainland China. The findings highlight three key points. First, the ETS significantly promotes energy transition. Robustness tests confirm the validity of this conclusion. Compared with non-pilot provinces, pilot provinces achieve a 4.83% increase in energy transition levels. Second, the energy transition effect of the ETS is mainly achieved by changing the incentive and constraint behavior of local governments. Third, the ETS exerts a more pronounced impact on energy transition in regions with higher levels of marketization and stronger innovation capabilities. Furthermore, the effects of the ETS vary across different quantiles of energy transition levels. This study provides a novel perspective on achieving the synergistic development of economic growth and environmental sustainability. Full article

Amid intensified global climate mitigation efforts, integrating rail freight into carbon emissions trading schemes became critical under China’s “Dual-Carbon” strategy. Despite rail’s significantly lower emissions intensity compared to road transport, existing pricing frameworks inadequately internalized its environmental externalities, which limited its competitive advantage. To address this gap, this study systematically reviewed international and domestic practices of integrating transport into carbon trading systems and developed a novel “four-layer, three-dimensional” emissions trading scheme (ETS) framework tailored specifically for China’s rail freight sector. Employing a Stackelberg bilevel optimization model, this study analyzed how carbon quotas and pricing influenced rail operators’ pricing and investment decisions. The results showed that under optimized quotas and carbon prices, railway enterprises were able to generate surplus carbon credits, creating new revenue streams and enabling freight rate reductions. This “carbon revenue–freight rate feedback loop” not only delivered environmental benefits but also enhanced rail’s economic competitiveness. Overall, this study significantly advances the understanding of carbon-based pricing mechanisms in railway freight, providing robust theoretical insights and actionable policy guidance for achieving sustainable decarbonization in China’s transport sector. Full article

This study examines the price dynamics of the UK Emission Trading Scheme (UK ETS) by integrating advanced computational methods, including deep learning and statistical modelling, to analyze and simulate carbon market behaviour. By analyzing long-memory effects and price volatility, it assesses whether UK carbon prices align with theoretical expectations from carbon pricing mechanisms and market efficiency theories. Findings indicate that UK carbon prices exhibit persistent long-memory effects, contradicting the Efficient Market Hypothesis, which assumes price movements are random and fully reflect available information. Furthermore, regulatory interventions exert significant downward pressure on prices, suggesting that policy uncertainty disrupts price equilibrium in cap-and-trade markets. Deep learning models, such as Time-series Generative Adversarial Networks (TGANs) and adjusted fractional Brownian motion, outperform traditional approaches in capturing price dependencies but are prone to overfitting, highlighting trade-offs in AI-based forecasting for carbon markets. These results underscore the need for predictable regulatory frameworks, hybrid pricing mechanisms, and data-driven approaches to enhance market efficiency. By integrating empirical findings with economic theory, this study contributes to the carbon finance literature and provides insights for policymakers on improving the stability and effectiveness of emissions trading systems. Full article

New Zealand’s Emissions Trading Scheme (ETS) allows growers to receive payments through the accumulation of carbon units for increased carbon stock. For forests < 100 ha, growers rely on pre-formulated lookup tables (LUTs) to estimate changes in carbon stock by age. Currently, minor exotic softwood species, which are predominantly redwood and cypresses, are covered by a general Exotic Softwoods LUT. However, this table has been found to significantly underestimate carbon sequestration for these species. Using a combination of growth models and productivity surfaces, the objective of this study was to provide draft updates for the Exotic Softwoods LUT based on redwood, and two key cypresses (Cupressus lusitanica and C. macrocarpa), at different scales (national, Island level, regional), and to identify the most appropriate scale for a revised LUT. For cypress species, carbon predictions were made using C. lusitanica for the North Island and C. macrocarpa for the South Island, as these are the preferred species for each island. Variation in redwood carbon among New Zealand’s nine regions ranged over two-fold at ages 30 (390–847 tonnes CO₂ ha⁻¹) and 50 (926–1956 tonnes CO₂ ha⁻¹) and carbon was much higher within the North Island than the South Island. Predicted carbon for cypresses was higher within the North Island than the South Island at all ages and varied across regions, by 38% at age 30 (610–840 tonnes CO₂ ha⁻¹) and 12% at age 50 (1019–1146 tonnes CO₂ ha⁻¹). These findings suggest that a separate LUT for redwood is warranted, and that cypress species could serve as the default species for a revised Exotic Softwoods LUT. They also suggest that regional tables should be considered for both redwood and cypresses. However, the government may consider factors other than the technical considerations outlined here when updating the LUTs. Full article

Chinese Emissions Trading Scheme (ETS) has been a crucial policy for China, a major manufacturing and carbon-emitting country, in achieving its “carbon neutrality” goals and sustainable development. This paper examines the performance of the ETS in China through the perspective of resource misallocation, and to find out whether and how China’s ETS works cost-effectively. Using Propensity Score Matching and the Difference-in-Differences (PSM-DID) method, this paper empirically investigates the relationship between China’s ETS and resource misallocation. The results show that: (a) the capital misallocation in ETS pilot areas is higher than other areas, while the labor misallocation in ETS pilot areas is lower than other areas. (b) The estimation results of PSM-DiD show that the ETS in China aggravated the capital misallocation, while it significantly improved the labor misallocation. The post-treatment test shows that the aggravation of the capital misallocation may fade with time, and the improvement of labor misallocation remains unchanged. (c) The proxy variable “state-owned” did significantly improve both capital and labor misallocation, indicating that the ETS in China worked partly and effectively as a “command-and-control” instrument. All the robustness tests are constructed, proving that the main results remain stable and reliable. This paper may provide some marginal contributions to the ever-growing empirical literature about the policy effects and mechanism of the carbon emission policies. These results prove that although the ETS is theoretically considered to be a market-oriented and cost-effective instrument, the supplementary policies are still essential and effective for ETS. These results also show that it may require a combination of diversified policies to reduce carbon emissions while maintaining sustainable economic growth. Full article

This paper explores how optimizing vessel speeds can help reduce carbon emissions in the maritime industry. Focusing on liner shipping routes between China and Europe, it examines how carbon pricing mechanisms, including carbon taxes and emissions trading under the European Union Emissions Trading Scheme (EU ETS), impact operational costs and emissions reduction. With the use of advanced optimization methods, such as the Non-dominated Sorting Genetic Algorithm-II (NSGA-II) and the Technique for Order of Preference by Similarity to an Ideal Solution (TOPSIS), this research explores the balance between adjusting vessel speeds and minimizing emissions. The findings show that shipping companies on the China–Europe route can reduce the financial strain of carbon pricing by carefully managing speeds and voyage times. This study compares two scenarios of carbon tax policy and carbon trading rights in terms of voyage costs and carbon emissions. The results of this comparison based on the given parameters indicate a reduction of 1124 tons of carbon emissions with the carbon tax policy scenario, while the carbon trading rights scenario allows for more voyages yearly (5.24 vs. 5.30). This demonstrates one policy being more economical, while the other is also more environmentally efficient. These insights support the development of strategies that align environmental goals with economic priorities, paving the way for more sustainable maritime operations. The study introduces its objectives and reviews relevant literature by presenting a detailed methodology, incorporating emissions modeling with clearly defined parameters. The analysis presents results that undergo sensitivity testing and limitations using MATLAB (R2022a version). The study concludes by discussing policy implications and recommendations for future research and practical advancement Full article

Coordinated control of pollution and carbon reduction is an imperative choice for China’s overall transition towards sustainability. However, China’s environmental policies often treat pollutants and CO₂ separately, potentially resulting in imbalanced pollution and carbon reduction. Since several cities are not only critical cities for the Air Pollution Prevention and Control Action Plan (APPCAP) policy but also pilot cities for the Carbon Emissions Trading Scheme (ETS), this study aims to examine the extent to which the policy coordination of APPCAP and ETS can influence air pollutants and CO₂ emissions. Using panel data from 2011 to 2019 for China’s 231 prefecture cities, we compare the pollution and carbon reduction effects of separate and coordinated policy implementation of APPCAP and ETS via the difference-in-differences (DID) model and the causal forest model. Research shows that (1) the policy coordination of APPCAP and ETS has significantly reduced both air pollutants and CO₂ emissions in dual-policy pilot cities. For non-dual pilot cities, the separate implementation of APPCAP or ETS only exerts significant unilateral effects. (2) Enhancing government supervision, weakening the relationship between government and enterprises, and raising enterprises’ green innovation capabilities are the main mechanisms through which policy coordination can significantly influence pollution and carbon reduction. (3) The combined implementation impacts of APPCAP and ETS are more evident in pollution-intensive cities and cities with weak carbon-peaking trends. Our research inspires the development of a collaborative system of pollution reduction and carbon reduction policies. Full article

This is the first review study that focuses on the interplay between China’s regulated and voluntary carbon markets, the Emissions Trading System (ETS), the China Certified Emission Reduction (CCER) scheme, and their combined influence on the development of renewable energy in the country. Through a comparative literature review of 52 peer-reviewed academic papers published between 2009 and 2024, this study aims to elucidate how these market mechanisms interact to drive renewable energy deployment. The findings indicate that both the ETS and the CCER system positively affect China’s renewable energy landscape. The ETS, with its Cap-and-Trade (CaT) mechanism, sets a cap on total emissions and allows for the trading of emission quotas, thereby creating financial incentives for companies to reduce emissions and invest in renewable energy. The CCER scheme complements the ETS by allowing companies to use the CCER scheme for a capped share of their ETS certificates, whereby the lower CCER price diverts investments to where the saved ton of CO₂ in China is cheapest, further incentivizing investments in renewable energy. This dual mechanism allows for a more flexible and cost-effective approach to achieving emission reduction targets, thereby fostering an environment conducive to investment in renewable energy. It will stimulate additional investment in renewable energy projects in the long run, particularly in economically underdeveloped regions, contributing to both local economic development and national emission reduction targets. Full article

Green technology innovation is an important driving force for low-carbon development of enterprises. As a market-based environmental policy to promote greenhouse gas emission reduction, whether carbon emission trading scheme (ETS) can encourage enterprises to carry out green technology innovation under the background of “dual carbon” goal deserves further research. Taking Chinese A-share listed enterprises in the five major sectors as samples, this study constructed a modified Difference-in-Differences (DID) model to test the causal effect of ETS on green innovation in high-carbon industries. Three significant results can be summarized from the empirical study. Firstly, the ETS has a significant promoting effect on green innovation of high-carbon enterprises. And it can effectively promote high-carbon enterprises to achieve an average of a 13.24–19.56% increase in low-carbon innovation capabilities. Secondly, enterprises with different characteristics have heterogeneity in the impact of ETS implementation on green innovation. Secondly, the implementation of ETS exerts heterogeneous effects on green technology innovation across enterprises that possess diverse characteristics. Enterprises with a large capital scale (low equity concentration) have a more significant promoting effect than those with a small capital scale (high equity concentration). Thirdly, the green innovation effect of ETS exhibits significant heterogeneity across different types of industries. In the mining, manufacturing, and construction sectors, the ETS has effectively stimulated green innovation to a certain extent. There has been no significant change in green innovation in the sector of electricity, heat, gas, and water production and supply. In particular, after the implementation of the ETS, green innovation has actually been weakened in the transportation sector. As such, for policy makers, differentiated ETS policies should be implemented based on the actual situation of different industries and types of carbon-emitting enterprises. Full article

For a sustainable landscape of local economies, many researchers have emphasized the importance of field-oriented differentiation in government policies. In particular, the Paris Agreement, based on the bottom-up approach, aims to maximize the participation of all economic agents, in contrast to the top-down approach of the Tokyo Protocol. In response to these global paradigm shifts in the local landscape, local governments in Korea have made significant efforts to adapt to sustainable development during the pilot phase of emission trading scheme (ETS), during the period from 2015 to 2020. This study evaluates the performance of these local government policies in the transition to a carbon-zero economy. Using the general non-radial directional distance function (GNDDF), we found that Gyeongsang Province demonstrated enhanced environmental total factor productivity (TFP) during the pilot project, whereas the Seoul metropolitan area lagged behind due to a lack of governance. As the economic center of Korea, Seoul showed poor environmental performance because of the arbitrary elimination of green belt areas and unchecked land development, resulting in environmental degradation, a trend common in many developing countries facing climate adaptation challenges. To address these urbanization issues, this study concludes that a balanced approach combining stricter regulations with market-oriented promotional incentives is essential for optimizing the transition of local economies to a sustainable landscape. Full article

Prefabricated buildings (PBs) are considered a green way to reduce energy consumption and carbon emissions in the construction industry due to their environmental and social benefits. However, PBs have obstacles such as high construction costs, immature technology, and insufficient policy incentives, and developers’ willingness to develop them needs to be higher. Therefore, it is necessary to explore how to motivate more developers to develop PBs. In this paper, we first discuss the impact of the carbon emissions trading scheme (ETS) on the construction industry and then consider the heterogeneity of construction developers, introduce a collaborative mechanism to establish a three-party evolutionary game model between the government and the heterogeneous developers, and explore the evolution of the three-party dynamic strategies through numerical simulation. The results show that developers’ initial development probability affects the system’s evolutionary trend, and the developer who obtains more low-carbon benefits plays a dominant role. Further analyses show that critical factors such as market profitability, synergistic benefits, and carbon tax price positively influence the development of PBs, and the influence of synergistic cooperation mechanisms should be especially emphasized. This study provides practical insights into the sustainable development of the construction industry and the government’s development of a suitable carbon portfolio policy for it. Including the construction industry in the ETS is recommended when carbon prices reach 110 RMB/t. At this point, the government can remove the subsidy for PBs, but the behaviors of the developers who participate in the ETS still need to be supervised. Full article

This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency. Full article