Assessing the operational performance and maturity of the carbon trading pilot program: The case study of Beijing’s carbon market
Introduction
Low carbon development strategy is a new and good development pursuing to deal with global climate change and the energy crisis. It is also identified as a feasible way and the inevitable choice for cities, especially in the context of environment deterioration and the rapid urbanization of China. As the political, educational and cultural center of China, Beijing’s highly successful economic development has been accompanied by huge pressure on natural environment. And its environment deterioration is already evident, particularly on the air quality issue nowadays. Air pollution in Beijing, particularly this PM2.5 concern, has been a trigger for extreme health damages, which is closely linked with Beijing’s road transport. Beijing’s residents have been severely affected. Moreover, Beijing’s image as the capital city of China and its sustainable development has also been severely affected (Chen and He, 2014, He and Chen, 2013, He and Qiu, 2016, Yang and He, 2016, He et al., 2016.). Therefore, implementing low carbon strategy in Beijing is in urgent need. Carbon market, as a low cost and high efficiency emission reduction tool, is being implemented worldwide (Cong and Wei, 2012, Cong and Wei, 2010a, Cong and Wei, 2010b). Beijing is one of the first batch of pilot cities in China carrying out a relatively large carbon emissions trading scheme. Beijing officially launched its carbon emissions trading scheme at Beijing Environmental Exchange on November 28th, 2013. Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong signed a cross-regional cooperative agreement of trading carbon emissions together, in order to lay a foundation for promoting regional carbon trading market construction and accumulate experience for forming a unified national carbon trading market of China in 2017. In this paper, carbon market of Beijing is the research object. We are trying to make an integrated assessment of the operational performance and the maturity of Beijing’s pilot carbon market with both qualitative and quantitative methods. And we hope to lay a foundation for the future development of energy conservation and emission reduction of Beijing and the establishment of a national carbon trading market. The operational performance means some benefits including social benefit, economic benefit and mitigation effectiveness from the operating carbon market, and the maturity means the carbon market’s development situation and degree including transaction, coverage breadth and market liquidity.
Currently, the construction of carbon market in China is still in the initial stage. Studies related to carbon market pilot cities are scarce. Most studies focus on the status quo of pilot cities by the qualitative analysis or comparative study. Clayton et al. (2016) conducted a qualitative comparative study of Guangdong, Shanghai and Shenzhen, the three pilot sites. Fu et al. (2014) aimed at Beijing’s pilot carbon market and analyzed the status quo from a macro perspective. Yang’s (2013) studies shed light on the sustainable development of Beijing’s carbon trading market. Analyzing the current situation, Yang pointed out that it is important to insist on market orientation and enhance the market competitiveness of Beijing’s carbon trading market. Wu (2013) suggested that free allocation should be implemented in the early stages and gradually be replaced by auction method. He also made some suggestions on market regulation mechanism.
In terms of studies on assessing the operational performance and maturity of carbon market, different methods had been used in those studies, such as Aggregative Indicator Method, Principal Components Analysis, Multi-Objective Decision-Making Method and Coefficient of Variance Method. Guo (2011) and Xu et al. (2014) applied DEA model to solve the issue of evaluation of the emission reduction performance about different objects. Zhang et al. (2014) used the feasible generalized least squares estimation on international panel data to evaluate the emission reduction performance of global carbon market. Jia et al. (2010) adopted a systematic performance evaluation system to assess the maturity of low carbon economic policies in the construction sector. Comparing to traditional methods, the TOPSIS model, as a widely used Multi-Objective Decision-Making Method, is able to provide more directly perceived analysis principles and require smaller sample size. Hence, it has great applied value especially for quantitative evaluation of preliminary launched pilot sites. Kuang and Chen (2007) conducted an integrated port competitiveness evaluation model based on Entropy and TOPSIS model to reveal the main influencing factor of port competitiveness. Wang (2009) conducted an evaluation study of the Chinese economy based on Combined Weighting Method and improved TOPSIS. Zhang and Liang (2009) created an improved TOPSIS for water quality assessment to better the multi-objective evaluation method. Xu et al. (2012) evaluated the carrying capacity of groundwater resources by using Entropy and improved TOPSIS model. Li et al. (2013) used the same method to assess the land use performance. Li et al. (2014) combined AHP and TOPSIS model to build up an evaluation model and set an in-depth evaluation of overall competitiveness of a logistics zone. Mi et al.(2015) assessed China’s provincial performance in climate protection based on the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method. The TOPSIS model has been widely used in many research topics. But in our research, to solve the issue of subjective weighting, we use the Coefficient of Variation Method, an objective method by using the information contained in the indicators to calculate the weight of each indicator. And this method eliminates the influence of subjective empowerment on some level.
Therefore, this paper intends to discuss the operational performance and maturity of Beijing’s carbon market which is in the current stage of development and with limited research findings based on the TOPSIS model. Our paper is structured as follows: Section 2 provides a brief narrative model for quantitatively assessing Beijing’s carbon market. Section 3 presents an in-depth qualitative analysis of carbon trading, compliance and policies and regulations of Beijing’s pilot carbon market. Section 4 shows the results and discussion of evaluating performance and maturity. Section 5 presents and interprets the policy implications.
Section snippets
Research framework
Fig. 1 shows the framework of this research. First of all, we make out a plan based on the previous job and collected data for our problems. Secondly, we qualitatively analyze the operation situation of Beijing’s carbon market.
Thirdly, we assess it based on the TOPSIS and variation coefficient method. Fourthly, Beijing’s carbon market was evaluated from two aspects, namely, the operational performance including environmental benefit, social benefit and economic benefit, and the maturity
Comparative analysis of the pilot sites
The opening of Shenzhen Carbon Exchange on June 18th, 2013 marks the official launch of “two provinces five cities” regional carbon trading pilots of China. In 2014, the Chongqing carbon exchange market opened. At that time, the “two province five cities” pilot carbon trading markets all started operating. The total amount of quotas in the carbon emissions trading system reached 12 tons and had more than 2000 enterprises in the market. The size of the market has been estimated to be 300 billion
Results and discussions of evaluating performance and maturity
In terms of comprehensive evaluation, there is a slight difference among most of the pilot carbon trading markets. The average value of close degree differences between the ranking carbon trading markets is 4.6%.
Strengthening quota management and increasing carbon trading activity
Beijing’s carbon trading pilot has achieved great progress and good performance in comprehensive evaluations. However, in terms of the maturity, it did not show significant trading activity and its average daily transactions volume did not meet expectation either. The carbon price experienced a continuously high and turbulent fluctuation. The average carbon price is 51.76 RMB, higher than other pilots’. The carbon price dropped from the highest rate 76.83 RMB on July 14th, 2014 to lowest rate
Acknowledgements
We gratefully acknowledge the financial support from the Science Fund for Creative Research Groups of the National Natural Science Foundation of China (Grant No. 71521002), the National Natural Science Foundation of China (Grant Nos.71573013), the Beijing Natural Science Foundation of China (Grant No. 9152014) and National Key R&D Program (Grant No. 2016YFA0602603), Joint Development Program of Beijing Municipal Commission of Education.
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