Research On Carbon Emission Allowance Allocation Mechanism Based On Carbon Emission Intensity Target

Climate change is a global environmental problem caused by carbon emissions,which poses a serious threat to the survival and development of human beings.To cope with climate change,carbon emission trading system,as an effective market-based emission reduction mechanism,has been implemented and promoted in many countries and regions.Among it,emission reduction targets and carbon emission allowance allocation rules are the basis of emission trading system.Changes in emission reduction targets and allocation rules will affect the operation of the emissions trading market and the overall emission reduction effect.Currently,the world’s major carbon emissions trading markets typically use the total amount of carbon emissions as the reduction target,and control CO2 emissions by setting a decreasing cap on total emissions each year.Adopting the total amount of carbon emissions as reduction target can ensure the reduction of emissions.Although it is more in line with the requirements of the global climate change agreement,the strict aggregate carbon emissions constraint may limit the space for economic growth,and increase the cost and difficulty of emission reduction,and may also lead to some fairness or distributive problems.Compared with emission cap regulation,intensity regulation can constrain emission intensity and can maintain a certain economic output while ensuring emission efficiency,which is significant for national development and energy structure transformation.However,it is more demanding on government policy making and implementation process.Further theoretical support is needed on how to determine the emission intensity target.The mechanism of allocation carbon emission allowance is another important foundation of emission trading market,involving emission reduction efficiency,market fairness,social welfare and so on.At the early stage of emission control,in order to relieve the pressure of emission reduction on enterprises to ensure social stability,the government usually adopts the free allocation mechanism to allocate carbon emission allowances to enterprises.However,under the net-zero emission target,the free allocation mechanism has many drawbacks,such as reducing the efficiency of the market,undermining the fair competition in output market,losing government revenue,and violating the "polluter pays" principle.Therefore,as the demand for emission reduction continues to increase,the emission trading system needs to gradually realize the transition from free allocation to paid allocation.In the context of free allocation mechanism for large-scale application of grandfathering and benchmarking,how to transition from free to paid allocation of emissions allowance is a problem that every country participating in the emission trading market needs to face and solve.As above,this paper mainly studies the allocation mechanism of emission trading system under the emission intensity regulation,and proposes a new hybrid allocation mechanism which is the combination of grandfathering and benchmarking rule and fixed price sale method.The purpose of this study is to discuss the impact of emission intensity regulation on the output market,the operating decision of enterprises,and compares the free allocation and hybrid allocation mechanism under the emission intensity regulation,and consider the impact of the allocation mechanism on the equilibrium quantity and long-term carbon emissions of firms in the long run.The study finds that carbon intensity regulation has certain policy flexibility and can effectively reduce carbon emissions intensity of enterprises,and can leads enterprises to carry out autonomous emission reduction enterprises;the combination of appropriate emission intensity limit and allocation methods can control total emissions,stimulate competition in the output market,and increase total output,thus reducing product prices and increasing consumer surplus;compared with the free allocation mechanism,a hybrid allocation mechanism combining the benchmarking and the fixed-price sale method can increase the government’s tax revenue and reduce the long-term emissions of each enterprise;the allocation mechanism affects the equilibrium number of enterprises in the industry in the long run,and the enterprises equilibrium number in different allocation mechanisms varies with the emission intensity limits set by the government and the carbon allowance cap in the grandfathering.In summary,this paper argues that the emissions trading system based on emissions intensity targets can lead enterprises to reduce emissions and effectively reduce emissions intensity.China’s emission reduction policy of "intensity control as the main,cap control as a supplement"is suitable for China’s economic development and emission reduction requirements.The grandfathering rule under tight emission intensity regulation is more effective in controlling carbon emissions and improving social welfare,and the government should pay attention to choosing appropriate allowance limits and emission intensity limits to maintain high social welfare levels.A hybrid allocation mechanism combining benchmarking and a fixed-price sale method can serve as a transition mechanism to paid allocation mechanism in the early stage of emission reduction,ensuring emission reduction while increasing government tax revenue and laying a financial foundation for subsequent emission reduction projects.