The Double-edged Impact and Solution of Emission Trading Scheme: Perspective from China

Abstract

 Emission Trading Scheme (ETS) is widely used for carbon emission globally, but there are few comprehensive studies about the debate of the impact of ETS. This paper presents new evidence of the double-edged impact and solution of Emission Trading Scheme by conducting qualitative methods like literature review to overcome the debate. Using evidence from China, it is found that the positive impact of ETS includes emission reduction, technological innovation and cheaper cost for emission reduction; the negative impact includes loss of GDP, carbon leakage and price bubble. In light of the findings, the negative impact of ETS could be overwhelmed by related policies like extending the coverage of areas and industries, combing ETS with a package of other related intervention and the supply of carbon tax.