Date of Award

Spring 2017

Degree

M.S. in Environmental Policy

Advisor

Professor Gautam Sethi

Second Reader

Professor Monique Segarra

Third Reader

Professor Caroline Ramaley

Abstract

China, the largest carbon dioxide emitter in the world, has faced environmental pressures both internationally and domestically over the last ten years. In early 2011, the Chinese government approved a carbon emissions trading program in seven cities and provinces, and started planning a national emissions trading framework. This thesis reviews these pilot programs and examines the issues that underlie them. Drawing lessons from the U.S. Acid Rain Program, the European Union’s ETS, and California’s CAT, the three largest emissions trading frameworks in the world, I find that: (1) lack of trades in China’s pilot programs is a consequence of permit over allocation; (2) lack of stringent regulations and penalties have caused low compliance rates and biased data quality; and (3) the secondary market has low liquidity and permit prices do not imply true values. Based on these results, I suggest using benchmarking and auctions instead of free distribution to allocate permits to prevent loopholes and over-allocation. Further, I suggest that the regulatory agency should enforce stringent rules on quality data and encourage transparency by creating a publicly trackable online database.

Access Control

Open Access