Does the coexistence of carbon emission trading and energy efficiency trading make sense? The case of China

Abstract

Many actions have been carried out to promote the low-carbon society construction in China, emission trading system (ETS) and energy efficiency trading (EET) are two typical instruments during the past five years. This paper focused on the coexistence between ETS and EET aiming to explore whether policy-mix could enhance industries’ interests through the partial-equilibrium model. The results showed that when overlapping transaction scope is allowed, the shadow price of energy saving is certain for the industries. When is not, setting up the policy-mix would not improve energy savings of industries but would make the two trading systems complementary, via the internal mechanism of the policy-mix and providing multiple policy options. The analysis indicated that EET and ETS could coexist and yield better results. Energy saving quota and CO2 quotas can be mutually recognized in a certain method avoiding the repeated accounting between two quotas, which will not increase the burden of enterprises but encourage them to conduct flexible emission reduction to enhance the competitiveness.

Keywords

• Carbon emission trading
• Energy efficiency trading
• Coexistence
• Overlapping
• Energy intensive sectors