Policy Design and Performance of Emissions Trading Markets: An Adaptive Agent-Based Analysis

Authored by Zhang Bing, Yu Qinqin, Bi Jun

Date Published: 2010-08-01

DOI: 10.1021/es9035368

Sponsors: Science Foundation of Jiangsu Province National Science Foundation of China

Platforms: NetLogo

Model Documentation: Other Narrative Flow charts

Model Code URLs: Model code not found

Abstract

Emissions trading is considered to be a cost-effective environmental economic instrument for pollution control. However, the pilot emissions trading programs in China have failed to bring remarkable success in the campaign for pollution control. The policy design of an emissions trading program is found to have a decisive impact on its performance. In this study, an artificial market for sulfur dioxide (SO(2)) emissions trading applying the agent-based model was constructed. The performance of the Jiangsu SO(2) emissions trading market under different policy design scenario was also examined. Results show that the market efficiency of emissions trading is significantly affected by policy design and existing policies. China's coal-electricity price system is the principal factor influencing the performance of the SO(2) emissions trading market Transaction costs would also reduce market efficiency. In addition, current-level emissions discharge fee/tax and banking mechanisms do not distinctly affect policy performance. Thus, applying emissions trading in emission control in China should consider policy design and interaction with other existing policies.

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