The Allocation Of CO₂Emission Permits

Numerous scientific studies show that climate change, which has been attracting more and more attention, is highly likely to be caused by the excessive accumulation of greenhouse gases in atmosphere. Since the industrial era, large amounts of CO2have been released from human activities and production processes, causing serious damage to the equilibrium of climate. Meanwhile, human beings have been increasingly aware of the necessity and urgency to control CO2emissions in the face of extreme weather conditions, food shortages and spread of disease caused by climate change.From the perspective of economics, this paper starts from analysis on the causes for the excessive emissions of CO2and the possible solutions based on externality theory and public goods theory. Compared with administrative regulations and the imposition of carbon tax, the CO2emissions trading scheme, based on the theory of property rights, shows inherent advantages in cost and efficiency. Nowadays, this kind of mechanism has been widely used in international and domestic fields. The analysis in this paper suggests that in the presence of market imperfections, such as transaction costs and market power, the effectiveness of this mechanism is largely dependent on the initial allocation of property rights (i.e. the CO2emission permits).In fact, different allocation modes and methods will exert systematic influences on the trading cost and efficiency. In addition, attention is paid to pointing out the symbiotic relationship between economic development and CO2emissions, resulted from the limitation of energy substitution efficiency as well as the emission-control technology. It implies that international allocation of carbon emission permits plays a decisive role in a country’s future development. For less developed countries, CO2emission is a kind of "right to development" and will affect the possibility and magnititude of welfare improvement of their citizens.Given the importance of CO2emission permits allocation, Chapter four of this paper suggests that the principle of "common but differentiated responsibilities", widely used in international climate negotiations, should be used as the basic principle to guide the allocation of emission permits at home and abroad. In this chapter, energy is devoted to reviewing the formation of this principle, interpreting its connotation, coping with the doubts and challenges facing it, and reaffirming its rationality and legitimacy as the basic principle guiding global climate action. To elaborate its applicability to the allocation of CO2emission permits, this chapter stems from the theory of property rights and follows the research paradigm of economics to illustrate that the allocation results based on this principle may contribute to the overall improvement in marginal global welfare and consist with efficiency principle of the property allocation. It is proved that the flexibility and inclusiveness of this principle can effectively facilitate the delimitation and allocation of property rights, and ensure its stability and successful execution after delimitation and allocation.With the principle of "common but differentiated responsibilities" being established as the basic principles of CO2emission permits allocation, Chapter five proposes international allocation method based on this principle. The sorting of existing researches shows that because researchers from different countries only focus attention on the interests of their own countries, the proposed allocation schemes differs significantly from each other, which are often incompatible and even in opposition to each other. To evade historical responsibilities, most allocation schemes employed by developed countries ignore the development needs of developing countries. On the other hand, the allocation schemes proposed by developing countries tend to overemphasize the disadvantages of their own country, and throw the full responsibility of emission control on developed countries. To break this deadlock, this chapter starts from the principle of "common but differentiated responsibilities" to reform the allocation modes in Kyoto Protocol. On the one hand, based on the concept of "common", this chapter emphasizes that countries worldwide are producers of greenhouse effect as well as the victims of climate change, and therefore, all of them are obligated and required to make contributions in climate mitigation action. On the other hand, based on the concept of "differentiated", this chapter gives full consideration to the difference in the population, historical responsibility and future development needs of countries worldwide, proposing multi-index allocation schemes based on the indices such as population size, cumulative emissions, transferred emissions and human development.In domestic field of CO2emission permits allocation, existing researches focus more attention on the comparison and the selection of free and auction allocation modes, and ignores the complicated procedures and substantial cost when CO2emission permit is directly granted to enterprises by the State, resulting from the vast territory and the large quantities of industries and enterprises in China. In addition, the difference in regions and industries (enterprises) in China is so obvious that resorting to a unified allocation pattern is neither fair nor effective. In view of this, Chapter six decomposes the domestic allocation process into two stages including regional allocation and enterprise allocation, and brings forth specific allocation schemes based on the principle of common but differentiated responsibilities". During regional allocation, efforts are spent in constructing the indicator system of CO2emission permit allocation and calculating the allocation coefficient and quantity of CO2emission permits in each region by dint of "multifactor weight allocation model based on information entropy" from four aspects including emission control responsibilities, emission control ability, emission control potential and future regional development. During enterprise allocation, this chapter puts forward staged operation mode that shifts focus from free allocation mode to auction allocation mode. This process will ease the obstacles from interest groups during the early implementation of the trading scheme, and will gradually strengthen the responsibility of the polluters, guarantee the fair competition among enterprises, further mobilize enterprise enthusiasm in emission control, and truly reflect the scarcity value of CO2emission permits. Furthermore, it is noted that the international competitiveness of the enterprises involved in the CO2trading scheme is influenced by industrial heterogeneity to varying degrees. In consideration of this, the "industrial exposure factor" is constructed to measure the influence on enterprises based on the difference in energy intensity, emission reduction ability and cost transfer capacity. Compared with the auction allocation, free allocation is less costly. Therefore, it is suggested that during the transition from free allocation to auction allocation, the enterprises in industries with high exposure factor should be treated differently from various aspects, such as, prolonging the time of free allocation or reserving the allowance of free allocation in auction allocation mode for the purpose of reducing cost impact and maintaining its international competitiveness.After systematic conclusion on the research achievements herein, Chapter seven attempts to put forward some policy suggestions for decision makers. On the one hand, in the international negotiation of CO2emission permit allocation, the suggestions include displaying the image of a great responsible country, firmly upholding the principle of’"common but differentiated responsibilities", and actively boosting the legalized process of this principle to realize the fairness and rationality of the allocation results of international CO2emission permits. On the other hand, as regards the allocation of domestic CO2emission permits, the effective information collection mechanisms, the registration and tracking mechanisms of emission permits, and the supervision and inspection mechanisms of the emission sources are recommended to be established to achieve scientific and effective allocation of domestic CO2emission permits and lay a solid foundation for subsequent transactions. By this way, emission control effect will be maximized to assist China in fulfilling its international obligations and then attaining low-carbon development on the basis of controllable...