4.8 Article

A dynamic and continuous allowances allocation methodology for the prevention of carbon leakage: Emission control coefficients

Journal

APPLIED ENERGY
Volume 236, Issue -, Pages 220-230

Publisher

ELSEVIER SCI LTD
DOI: 10.1016/j.apenergy.2018.11.095

Keywords

Emissions trading system; Competitiveness; Carbon leakage; Allowance allocations; Developing countries

Funding

  1. National Natural Science Foundation of China [71828401]
  2. Major Projects of the National Social Science Fund of China on Supply-side Structural Reform and New Developing Impetus [16ZDA006]
  3. National Social Science Fund of China on Energy Consumption and Efficiency in New Urbanization Process [15BTJ021]

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Carbon leakage has become the core issue of emission trading systems. Using data from Hubei Province, this paper identifies the drawbacks of the prevailing methods for preventing carbon leakage and proposes a new methodology to overcome them, namely, Emission Control Coefficients. In contrast to the common tiered structure method, the Emission Control Coefficients generate a dynamic and continuous emission control coefficient for each industry which will improve the effectiveness and fairness of allowance allocation, set aside sufficient time for the low carbon transformation of industries, and balance the needs to protect competitiveness and decarbonize and are particularly suitable for the emission trading systems of developing counties. This paper makes three main academic contributions: Firstly, it proposes a new indicator, the abatement potential for more effective determining allowance allocation than the prevailing method. Secondly, it better distinguishes industrial differences. Thirdly, it can better respond to the problem of excess allowances that is due to technological advances and trade pattern changes.

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