A Study Of China’s Carbon Allocation Mechanism And Its Influence On Emission Reduction Behaviors Of ETS-covered Enterprises

It is an important task for China to allocate carbon emission quotas among regions so as to realize its carbon reduction targets and establish the national cap-and-trade carbon market. This paper allocates quotas from cooperation method and analyzes the impact of China’s carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises.Regional carbon allocation by Shapley value: It is supposed to be cost-effective to jointly reduce China’s carbon emissions through some collaborative activities among regions. Then a natural question is how to allocate the quotas among regions in light of the collaboration. For this purpose, the Shapley value method is adopted and the results show that, first, the regions with higher GDP, higher carbon outflow and higher carbon reduction connection should be allocated more carbon quotas. Moreover, when the collaboration is considered, the optimal allocation of carbon quotas among regions will change significantly compared to the basic quotas by the entropy method; and the Central region is allocated the largest proportion of carbon quota among regions, which indicates its largest radiation effect. Besides, the collaboration between the Central region and Northern coast region, and that between the Central region and the Eastern region should be paid close attention. These results may provide insightful support for decision makers to promote collaborative carbon reduction and allocate carbon quotas in China.The impact of China’s carbon allowance allocation rules emission reduction behaviors of ETS-covered enterprises: It is an important task for China to allocate carbon emission allowance to realize its carbon reduction target and establish carbon trading market. China has designed several allocation rules within seven pilot regions. What influence those rules may cause is closely related with the enthusiasm of emission trading scheme(ETS) covered enterprises’ participation in carbon market, and more importantly, with the mechanism design and sustainable development of carbon market. For this purpose, the multi-stage profit model is developed to analyze the ETS-covered enterprises’ product prices and emission reduction behaviors under different allocation rules. The results show that. first, under the rules of grandfathering, self-declaration and auctioning, when deciding the optimal product price and optimal carbon emission benchmarking, those enterprises may care more about the impact of current decisions on the profit in next stage. Second, the optimal product price policy is positively correlated with the price of the same kind products, consumers’ low-carbon awareness and government subsidy. Finally, along with the increase of carbon price, consumers’ low-carbon awareness and government subsidy and the decrease of carbon emission cap, those enterprises tend to reduce carbon emissions.