The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings
Sectoral coverage that plays a critical role in operationalizing the emission trading scheme (ETS), has gained substantive attention. Despite the insightful views on sectoral coverage from the emission reduction potential or carbon leakage, previous studies overlook the cost-effectiveness of ETS in...
| Autores principales: | , , , , |
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| Formato: | Journal Article |
| Lenguaje: | Inglés |
| Publicado: |
IOP Publishing
2022
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| Acceso en línea: | https://hdl.handle.net/10568/127454 |
| _version_ | 1855521746433605632 |
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| author | Zhang, Qifeng Fang, Kai Chen, Jing Liu, Hong Liu, Peilin |
| author_browse | Chen, Jing Fang, Kai Liu, Hong Liu, Peilin Zhang, Qifeng |
| author_facet | Zhang, Qifeng Fang, Kai Chen, Jing Liu, Hong Liu, Peilin |
| author_sort | Zhang, Qifeng |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | Sectoral coverage that plays a critical role in operationalizing the emission trading scheme (ETS), has gained substantive attention. Despite the insightful views on sectoral coverage from the emission reduction potential or carbon leakage, previous studies overlook the cost-effectiveness of ETS in the sense that the varying marginal contributions of each sector to reducing emission abatement costs (EACs) (which is defined as marginal cost savings, MCSs) remain underexplored. To fill this gap, this paper proposes a costs-oriented approach for sectoral coverage (COASCO), which ranks the sectors by estimating and comparing their MCSs. Taking China's climate targets by 2030 as an example, we conduct an empirical study that implements the COASCO method to explore the impacts of sectoral coverage on China's EACs. Our analysis demonstrates that, while coverage extension generally reduces China's EACs, a small sectoral coverage can already lead to a substantial decline in the national EACs. The results underpin the Pareto principle that covering six sectors (i.e. Electricity production, Metallurgy, Transport and storage, Petroleum and gas, Nonmetal mining) out of 29 can reduce China's EACs by over 80% compared to covering Electricity production only. Although coverage extension may reduce the differences in EACs between sectors and improve market activation, extending the sectoral coverage probably gives rise to the number of big carbon traders, which then increases the risks of market manipulation. As a result, covering those six sectors can reach a balance between ETS market activation and risks. By providing a generalized and systematic framework for determining the sectoral coverage, this study makes it possible to minimize the total EACs associated with any sectoral coverages, thus assisting policymakers in fulfilling China's latest ambitious goals of reaching carbon peaking by 2030 and carbon neutrality by 2060 in a cost-effective manner. |
| format | Journal Article |
| id | CGSpace127454 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2022 |
| publishDateRange | 2022 |
| publishDateSort | 2022 |
| publisher | IOP Publishing |
| publisherStr | IOP Publishing |
| record_format | dspace |
| spelling | CGSpace1274542025-10-26T12:51:33Z The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings Zhang, Qifeng Fang, Kai Chen, Jing Liu, Hong Liu, Peilin emission emissions trading sectoral analysis carbon costs electrical energy metallurgy transport infrastructure fossil fuels mining markets Sectoral coverage that plays a critical role in operationalizing the emission trading scheme (ETS), has gained substantive attention. Despite the insightful views on sectoral coverage from the emission reduction potential or carbon leakage, previous studies overlook the cost-effectiveness of ETS in the sense that the varying marginal contributions of each sector to reducing emission abatement costs (EACs) (which is defined as marginal cost savings, MCSs) remain underexplored. To fill this gap, this paper proposes a costs-oriented approach for sectoral coverage (COASCO), which ranks the sectors by estimating and comparing their MCSs. Taking China's climate targets by 2030 as an example, we conduct an empirical study that implements the COASCO method to explore the impacts of sectoral coverage on China's EACs. Our analysis demonstrates that, while coverage extension generally reduces China's EACs, a small sectoral coverage can already lead to a substantial decline in the national EACs. The results underpin the Pareto principle that covering six sectors (i.e. Electricity production, Metallurgy, Transport and storage, Petroleum and gas, Nonmetal mining) out of 29 can reduce China's EACs by over 80% compared to covering Electricity production only. Although coverage extension may reduce the differences in EACs between sectors and improve market activation, extending the sectoral coverage probably gives rise to the number of big carbon traders, which then increases the risks of market manipulation. As a result, covering those six sectors can reach a balance between ETS market activation and risks. By providing a generalized and systematic framework for determining the sectoral coverage, this study makes it possible to minimize the total EACs associated with any sectoral coverages, thus assisting policymakers in fulfilling China's latest ambitious goals of reaching carbon peaking by 2030 and carbon neutrality by 2060 in a cost-effective manner. 2022-04-01 2023-01-18T20:06:40Z 2023-01-18T20:06:40Z Journal Article https://hdl.handle.net/10568/127454 en Open Access IOP Publishing Zhang, Qifeng; Fang, Kai; Chen, Jing; Liu, Hong; and Liu, Peilin. 2022. The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings. Environmental Research Letters 17(4). https://doi.org/10.1088/1748-9326/ac55b7 |
| spellingShingle | emission emissions trading sectoral analysis carbon costs electrical energy metallurgy transport infrastructure fossil fuels mining markets Zhang, Qifeng Fang, Kai Chen, Jing Liu, Hong Liu, Peilin The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title | The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title_full | The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title_fullStr | The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title_full_unstemmed | The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title_short | The role of sectoral coverage in emission abatement costs: Evidence from marginal cost savings |
| title_sort | role of sectoral coverage in emission abatement costs evidence from marginal cost savings |
| topic | emission emissions trading sectoral analysis carbon costs electrical energy metallurgy transport infrastructure fossil fuels mining markets |
| url | https://hdl.handle.net/10568/127454 |
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