Regional allocation of carbon emission quotas in China: Evidence from the Shapley value method

Abstract

It is an important task for China to allocate carbon emission quotas among regions so as to realize its carbon reduction targets and establish the national cap-and-trade carbon market. Meanwhile, it is supposed to be cost-effective to jointly reduce China׳s carbon emissions through some collaborative activities among regions. Then a natural question is how to allocate the quotas among regions in light of the collaboration. For this purpose, the Shapley value method is adopted and the results show that, first, the regions with higher GDP, higher carbon outflow and higher carbon reduction connection should be allocated more carbon quotas. Moreover, when the collaboration is considered, the optimal allocation of carbon quotas among regions will change significantly compared to the basic quotas by the entropy method; and the Central region is allocated the largest proportion of carbon quota among regions, which indicates its largest radiation effect. Besides, the collaboration between the Central region and Northern coast region, and that between the Central region and the Eastern region should be paid close attention. These results may provide insightful support for decision makers to promote collaborative carbon reduction and allocate carbon quotas in China.

Yabin Da

Assistant Professor

Research interests include Environmental Economics (Climate Change), Applied Econometrics, and Causal Inference.