Selection mechanism between emission trading and carbon tax based on simulation of dynamic marginal abatement cost
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| Title | Selection mechanism between emission trading and carbon tax based on simulation of dynamic marginal abatement cost
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| Author | Huang Libo, Qian Haoqi and Tang Weiqi |
| Organization | School of Economics, Fudan University |
| Email | wulibo@fudan.edu.cn;qianhaoqi@fudan.edu.cn;tangwq@fudan.edu.cn |
| Key Words | dynamic marginal abatement cost curve, emission cap and trading, carbon tax |
| Abstract | When facing with emission constraint, firm’s optimal behavior will be changed and thus affect abatement cost directly. As a result, the effectiveness of quantity control policy and price control policy will be different under this situation with uncertainty. This paper introduces this micro-mechanism into the dynamic regional computable general equilibrium model of China to simulate each region’s marginal abatement cost curve from year 2007 to 2020 and study the choice between emission trading policy and carbon tax policy. Firstly, the results show that the slopes of each region's MAC curve will increase gradually and MAC curves will occur kink points. Secondly, slopes on both sides of MAC curve are different and kink points will move due to tighter emission constraint. For the reason that quantity control policy is more suitable than price control policy when there exists uncertainty and the slope of MAC curve is flat, the results imply that emission trading scheme is more applicable currently in China. But when emission target become more stringent in the future, policy makers should also introduce carbon tax into low carbon policy system. |
| Serial Number | WP709 |
| Time | 2014-09-22 |
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