"'A major step forward.' China launches its carbon market"

New RFF study "China’s Unconventional Nationwide CO₂ Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy" was featured in E&E News article. Listed below are a few excerpts from the article:

"China has launched its long-awaited national emissions trading system, a set of market-based greenhouse gas regulations to be imposed first on 2,392 coal- and natural gas-fired power plants that produce 40% of the nation's massive carbon dioxide emissions.

One of the first groups to study the emerging program, Resources for the Future (RFF), predicts that China's move will "more than double" the amount of regulated CO2 emissions globally.

'We emphasize that this is really a major step forward,' explained Lawrence Goulder, a fellow at RFF and a Stanford University professor of environmental and resource economics.

The program could be expensive compared with its counterparts in the United States and Europe. Goulder said China's effort will cost 47% more than cap-and-trade programs used by 28 nations, provinces and states, such as California. But he added that the benefits to the climate will be three times greater than the cost once the program is fully implemented. He said accompanying health benefits, once they are calculated, will be 'much higher.'

The higher regulatory costs come from what the authors call an 'implicit subsidy' that encourages more power production.

China's program tries to keep prices for electricity low and reduce the burdens on some of its poorer provinces and on companies whose products are threatened by foreign competitors. 'We don't know for sure how stringent this will be,' said Goulder, estimating that the first phase of the program will cut power plant emissions by roughly 3%."

Read the full article here.