Valuation Study

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Policy Conflicts in Emissions Trading


Medium: Animals, Plants and/or Others

Country: China

Analytical Framework(s): Institutional Analysis

Study Date: 2010

Publication Date: 2014

Major Result(s)

Study Note: It was mentioned in the paper that in examining the SO2 emissions trading market of power plants in Jiangsu Province, the main 45 Jiangsu power plants were used for analysis. These 45 power plants account for 75.7% of the SO2 emissions discharge created by the electric power industry in 2010, and 48,704 MW of power capacity.

Study Details

Reference: Bing Zhang and Yongliang Zhang. 2014. Policy Conflicts and Performance of Emissions Trading Markets: An Adaptive Agent-based Analysis. EEPSEA Research Report, No. 2014-RR9.

Summary: Using the Jiangsu SO2 emissions trading market as a case study, this research developed an agent-based model of the emissions trading market. By combining the policy conflicts of the agent-based model, the market performance of the Jiangsu SO2 emissions trading market was examined. Results showed that policy conflicts had a significant impact on the Jiangsu SO2 emissions trading market, with the exception of the current level of the pollution discharge fee. The regional total pollution control policy had the most significant impact on market performance. Taking all four policy conflicts into consideration, the total pollution control costs saved by the emissions trading market was limited (4.79%).

Site Characteristics: This research chose the Jiangsu Province SO2 emissions trading market as a case study. Jiangsu is the only province in China that has both an acid rain control zone and a sulfur dioxide control zone. In its 10th Five-Year Plan, the Jiangsu annual average SO2 concentration increased, as did the acid rain frequency. In 2005, the acid rain frequency reached 33.9%. In the 11th Five-Year Plan, central government required Jiangsu to reduce SO2 emissions by 18% on the basis of the level recorded in 2005. In the new 12th Five-Year Plan, Jiangsu also planned to reduce 10% of SO2 on the basis of the level recorded in 2010. Emissions trading is considered a feasibile mechanism to achieve total pollution control targets with lower economic costs. A new SO2 emissions trading measure was issued by the Jiangsu Environmental Protection Department (EPD) in 2012.

Comments: The authors noted that this research looked at four existing environmental policies and their effect on the Jiangsu SO2 emissions trading market, and that they achieved this via interviews conducted with staff at the featured power plants in Jiangsu Province. However, they also reported that the behavior of the power plants in the emissions trading market was very complex and could be impacted further by other environmental policies. They then recommended that future research should take all of these related policies into consideration.