The Impacts of Different Emission Tradable Permits Allocation Mechanism in Electronic Sector

摘要

This paper explores the impacts of two allocation mechanisms (grandfathering and auctioning) in both ERCs (Emission Reduction Credits) and Allowance Systems on the marginal and average cost of producing electricity by using a simple theoretical model. The results indicate that the impacts of different allocation methods are very small in the Allowance System. However, in the ERC system, the impacts of different allocation methods depend on the changes in production behavior after initial purchasing permits. The auctioning with ERCs system is preferred because the polluting firms will produce more and benefits people with lower energy price. Chinese emission trading system may offer the permits with a combination of two mechanisms and any institutional changes of the emission trading system must be consistent with Chinese social development.