Allowance Auction Design for China's National Carbon Market: Revenue Neutrality, Price Stability, and Allocation Efficiency

Start date

China is using free allowance allocation in the national carbon emissions trading systems (ETS). With the goal of transitioning to a more efficient auction-based ETS, mechanisms that balance market efficiency and cost burden concerns are much needed, especially for developing countries. ii) We design and evaluate such allowance auction mechanisms, and provide technical support for policymakers to transit away from free allocation with cushioned economic effects and guide industry practitioners with better price signals for trading, abatement, and innovation. iii) We use theory, numerical simulation, and economic experiments to compare alternative mechanisms in ETS experiments with real world parameters. Large-scale experiments will be conducted in the lab (Xiamen University) and in the field for industry practitioners (Beijing Green Exchange). iv) Policy briefs on auction schemes will be submitted to the Ministry of Ecology and Environment and top field journal articles will be produced. v) Emissions trading; allowance allocation; auction; experiments.

Project status
Financed by
Environment for Development initiative
Project | 5 December 2023