Climate | Technical Report
What to expect from sectoral trading : a U.S.-China example
15 March 2016
BY: GAVARD Claire, WINCHESTER Niven, JACOBY Henry, PALTSEV Sergey
In recent United Nations Framework Convention on Climate Change (UNFCCC) negotiations, sectoral mechanisms were proposed as a way to encourage early action and spur investment in low carbon technologies in developing countries, particularly in the electricity sector. Sectoral trading, which is one such proposition, involves including a sector from one or more nations in an international cap-and-trade system. In order to assess potential impacts from such a mechanism, we analyze trade in carbon permits between the Chinese electricity sector and a U.S. economy-wide cap-and-trade program using the MIT Emissions Prediction and Policy Analysis (EPPA) model. We find that this sectoral policy induces significant financial transfers between the two countries. In 2030, the U.S. purchases permits valued at $42 billion from China, which represents more than 46% of its capped emissions. Despite these transfers, there is only a small change in Chinese welfare. In the U.S., the availability of relatively cheap emissions permits significantly reduces the cost of climate policy. In China, sectoral trading increases the price of electricity and reduces the amount of electricity generated, particularly from coal, while opposite effects are observed in the U.S. Despite increases in the price of electricity in China, only small increases in electricity generation from nuclear and renewables are projected in the timeframe of our analysis (2010- 2030). Because the price of coal decree ses, we also find that sectoral trading leads to emissions increases in non-electricity sectors in China, a form of internal carbon leakage.
logo cadmus Read it on Cadmus

LATEST FSR PUBLICATIONS

Other
Rail has a key role to play in making transport more efficient and sustainable in the EU and elsewhere. However, increasing passenger and cargo volumes require investment in infrastructure, and [...]
Technical Report
In this work, we present the major application and impact areas of Contracts-for-Difference (CfDs) in a European context, describe the most relevant design dimensions and discuss several design packages for [...]
Other
After years of record announcements, frantic policy development and the establishment of substantial public support mechanisms, the clean hydrogen sector is nearing an inflexion point. Many clean hydrogen projects have [...]
Other
The safeguarding of critical offshore energy infrastructure has assumed a heightened level of urgency in the wake of the Nord Stream pipeline explosions in September 2022 and the suspected sabotage [...]
Other
The Performance Review Commission (PRC) is an independent body supported by EUROCONTROL with a remit to review and report on European air traffic management (ATM) performance. While performance has improved [...]
Technical Report
As part of the LIFE COASE project, the first Net Zero Carbon Market Policy Dialogue (NZCMPD) was held in September 2023 to discuss the latest developments and challenges faced by [...]

Join our community

To meet, discuss and learn in the channel that suits you best.

scroll

top