Critical Issues of Carbon Emission Trading in China

China has decided to develop a low-carbon economy and aims to implement more market-based instruments in order to achieve its low-carbon objectives in a cost-effective way. Among these instruments, seven pilot carbon emission trading systems (ETS) have been introduced since 2013 with a national ETS to follow by 2016. Carbon taxation would also be implemented in the short term. China's economic structure and socio-economic context must be taken into account when implementing market-based instruments of which the economic foundation is developed based on the context of developed economies. This presentation addresses some critical issues of the ETS in China. First, it shows the socio-economic contexts of the seven ETS pilot regions and designs of local ETS before discussing how ETS should contribute to local low-carbon development targets. Secondly, it addresses determinants of a well performing ETS in China, which include ETS and regulated electricity price; liquidity; coherence with other climate policies; predictability and data issues (MRV). Thirdly, this presentation demonstrates some major results of the impact of carbon pricing with a particular focus (44-sector level) on industrial domestic and export/import outputs by using the CGE model of thr State Information Center of China (namely, SICGE model). Fourth, this presentation shows some basic contents of CGE models developed based on SICGE for Tianjin and Shanghai municipalities which conduct pilot ETS; and the regional input-output table of China which can be used to assess regional interactions under different carbon pricing scenarios in China. Finally, related (ongoing) works of the author are summarized.