American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
China's Nationwide CO2 Emissions Trading System: A General Equilibrium Assessment
American Economic Journal: Economic Policy
(pp. 32–62)
Abstract
China's CO2emissions trading system, the world's largest, aims to significantly reduce CO2 emissions. The system is a tradable performance standard (TPS), differing from cap and trade (C&T). We provide a dynamic general equilibrium assessment that uniquely considers institutional and fiscal features of China that affect policy costs and distributional impacts. Key findings: The TPS's environmental benefits exceed its costs by a factor of five or more. Interactions with the fiscal system reduce or eliminate the TPS's cost disadvantage relative to C&T. Introducing auctioning as a complementary source of allowance supply can reduce costs by 30 percent.Citation
Goulder, Lawrence H., Xianling Long, Chenfei Qu, and Da Zhang. 2026. "China's Nationwide CO2 Emissions Trading System: A General Equilibrium Assessment." American Economic Journal: Economic Policy 18 (4): 32–62. DOI: 10.1257/pol.20240652Additional Materials
JEL Classification
- D58 Computable and Other Applied General Equilibrium Models
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- P28 Socialist Systems and Transitional Economies: Natural Resources; Energy; Environment
- Q54 Climate; Natural Disasters and Their Management; Global Warming
- Q58 Environmental Economics: Government Policy