Ziyuan Kexue (Feb 2023)
Carbon quota scheme for China’s iron and steel industry based on output efficiency
Abstract
[Objective] In order to help China’s iron and steel industry to enter the carbon emission trading market, previous studies have mainly allocated carbon quotas for iron and steel enterprises from the perspective of the impact of cost. However, the iron and steel industry has large carbon emissions and complex production processes, and overemphasizing the impact of cost will easily reduce the benefits of emission reduction, which is not conducive to promoting the low-carbon transformation of iron and steel enterprises. Based on the carbon emission reduction efficiency and output efficiency, this study aimed to design a carbon quota allocation scheme that conforms to the current development situation of China’s iron and steel industry. [Methods] This study reviewed the production steps of different iron and steel production processes, took carbon quota as the necessary raw material for continuous production of each steps, and reconstructed the iron and steel production processes. By superposing carbon quota, an input-output stochastic frontier model was constructed, and the estimation formula of production efficiency and carbon quota efficiency of the iron and steel industry was obtained. Comparing the impact of different carbon quota reference values on the output rate of the iron and steel production processes, and taking efficiency improvement rate as the selection standard, this study determined the cross-regional carbon quota baselines of China’s iron and steel industry. [Results] Compared with the historical emission method, benchmarking is more suitable for the carbon quota allocation of China’s iron and steel industry. The carbon quota baselines of China’s iron and steel industry should be set in the top [30%, 50%] range of the industry, and the optimal baseline should be set in the top 40% of the industry. When the carbon emission is greater than the top 50% of the industry, the production rate of the iron and steel industry decreases with the increase of the carbon emission baseline. Incorporating the iron and steel industry into China’s carbon emission trading scheme by the benchmarking method will help this industry to both save carbon tariffs and obtain a carbon market share. [Conclusion] Allocating carbon quotas based on output efficiency can help improve the efficiency of emission reduction in the iron and steel industry, and stimulate the potential of independent emission reduction in this industry. Extending the quota allocation method of this study will help the whole process of decarbonization in China’s iron and steel industry.
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