China started seven carbon cap-and-trade pilot programs in order to inform the development of a future national cap-and-trade market. This paper assesses the design of three of the longer-running cap-and-trade pilot programs in Guangdong, Shanghai and Shenzhen. Based on extensive stakeholder interviews and a detailed literature review we formulate a series of recommendations to improve the design of these three pilots, including: strengthening the legal foundations for the cap-and-trade pilots, incorporating achievement of goals established by the cap-and-trade pilots into the performance reviews of participating government officials and executives of state-owned entities, further clarifying the cap-setting process, increasing the transparency of the cap, reducing or eliminating within-compliance period adjustments to enterprise-level allowance allocation, gradually moving away from free allocation toward auctioning, reforming enforcement policy, and adopting a symmetric safety valve to manage prices. By making these recommendations, we hope to shed light on ways that Chinese regulators might adapt cap and trade, a fundamentally market-based tool, to China's economy that has many non-market features.
Workshop/Seminar — Dec 3, 2014
Carbon Cap and Trade in China: From Experimentation to Nationalization?
At this RFF First Wednesday Seminar, RFF’s Clayton Munnings and Richard Morgenstern presented key findings from a recent RFF discussion paper, which assesses the design of three of the pilot programs, in Guangdong, Shanghai and Shenzhen.
Common Resources — Oct 20, 2014
Cap and Trade in China: How Might It Work?
China plans to start a nationwide cap-and-trade market in 2016. But can China, whose economy still contains many nonmarket features, properly desig...
Common Resources — Oct 7, 2021
Two Paths to 1.5°C: Will We Take Either One?
Two major projections for the trajectory of global energy use, which assume that temperature increases are stabilized at 1.5 degrees Celsius, make vastly different estimates about future energy consumption.