The Efficiency of China’s Carbon Trading Schemes: A Tale of Seven Pilot Markets

Yigang WEI; Yan LI; Julien CHEVALLIER; Michal WOJEWODZKI

doi:10.3390/commodities3030020

The Efficiency of China’s Carbon Trading Schemes: A Tale of Seven Pilot Markets

Yigang WEI, Yan LI, Julien CHEVALLIER^*, Michal WOJEWODZKI

^*Corresponding author for this work

Department of Finance

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency.

Original language	English
Pages (from-to)	355-375
Journal	Commodities
Volume	3
Issue number	3
DOIs	https://doi.org/10.3390/commodities3030020
Publication status	E-pub ahead of print - 29 Aug 2024

Keywords

emission trading scheme (ETS)
efficiency evaluation
bootstrap-DEA
pure technical efficiency
scale efficiency
China

Access to Document

10.3390/commodities3030020Licence: CC BY

https://www.mdpi.com/2813-2432/3/3/20

Cite this

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title = "The Efficiency of China{\textquoteright}s Carbon Trading Schemes: A Tale of Seven Pilot Markets",

abstract = "This study evaluates the efficiency of China{\textquoteright}s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots{\textquoteright} overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency.",

keywords = "emission trading scheme (ETS), efficiency evaluation, bootstrap-DEA, pure technical efficiency, scale efficiency, China",

author = "Yigang WEI and Yan LI and Julien CHEVALLIER and Michal WOJEWODZKI",

year = "2024",

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doi = "10.3390/commodities3030020",

language = "English",

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T1 - The Efficiency of China’s Carbon Trading Schemes: A Tale of Seven Pilot Markets

AU - WEI, Yigang

AU - LI, Yan

AU - CHEVALLIER, Julien

AU - WOJEWODZKI, Michal

PY - 2024/8/29

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N2 - This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency.

AB - This study evaluates the efficiency of China’s seven emission trading schemes (ETS) piloted in 2013. We evaluate seven pilots’ overall technical and scale efficiencies and temporal dynamics during 2014–2023. We use a bootstrap correction data envelopment analysis (bootstrap-DEA), which guarantees a more accurate efficiency estimation than the traditional DEA model. The results show that the average overall (pure technical) efficiency of the seven pilot markets increased from 0.612 (0.844) in 2014 to 0.898 (0.990) in 2023. Furthermore, we document that seven ETS pilots differ remarkably in efficiency and transaction price, whilst all have shortages. Specifically, the small-scale market transaction is the main constraint effect on the average scale efficiency of the ETS. This study provides concrete recommendations for policy makers to consummate institutional designs to improve ETS efficiency.

KW - emission trading scheme (ETS)

KW - efficiency evaluation

KW - bootstrap-DEA

KW - pure technical efficiency

KW - scale efficiency

KW - China

U2 - 10.3390/commodities3030020

DO - 10.3390/commodities3030020

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