Enterprise responses to China’s national emissions trading system: evidence from a nationwide survey

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Provides empirical evidence on ETS effectiveness and enterprise behavior, useful for carbon pricing research.

🏢実務担当者:Offers insights on compliance strategies and carbon management improvements for firms under ETS.

🏛政策担当者:Highlights design flaws (block trading, uncertainty) that undermine ETS effectiveness, informing policy improvements.

As the world's largest emissions trading system (ETS) by covered emissions, China's national ETS has undergone three compliance periods, yet empirical evidence on its effectiveness remains scarce. Based on a nationwide survey, we provide the first comprehensive ex-post evaluation of the system's impacts on regulated enterprises by examining their responses and attitudes. The evaluation covers key dimensions including allowance allocation and compliance, trading behaviour and banking strategies, emissions accounting and reporting, and emission reduction actions. Our findings reveal distinct differences between allowance-deficit and allowance-surplus enterprises in trading strategies, economic performance, and mitigation efforts. The ETS significantly improves enterprises' emissions data accuracy and their carbon management capabilities. Nevertheless, despite increasing compliance pressures due to progressively stringent benchmarks, trading activity remains largely compliance-driven, with block trading within corporate groups prevailing. These patterns hinder market liquidity and undermine the ETS's role in effective price discovery. These findings not only provide critical insights for improving China's national ETS design but also offer broader lessons for other jurisdictions contemplating carbon pricing instruments. Key policy insights Policy uncertainty, including delays in publishing allocation plans and unclear rules regarding allowance validity, increases risk aversion among enterprises, which in turn weakens the effectiveness of China’s national ETS.Block trading significantly restricts market liquidity and undermines the ETS’s price discovery function, highlighting the need for more transparent and regulated trading mechanisms.The rate-based ETS imposes compliance costs on enterprises with allowance deficits, leading to distinct differences in trading strategies, economic performance, and emissions mitigation measures between surplus and deficit enterprises.Despite the adoption of carbon management and mitigation actions, 85% of enterprises remain unaware of their marginal abatement costs, limiting informed decision-making and market participation.A comprehensive approach that goes beyond the design of the national ETS is necessary to enhance its effectiveness and efficiency. Policy uncertainty, including delays in publishing allocation plans and unclear rules regarding allowance validity, increases risk aversion among enterprises, which in turn weakens the effectiveness of China’s national ETS. Block trading significantly restricts market liquidity and undermines the ETS’s price discovery function, highlighting the need for more transparent and regulated trading mechanisms. The rate-based ETS imposes compliance costs on enterprises with allowance deficits, leading to distinct differences in trading strategies, economic performance, and emissions mitigation measures between surplus and deficit enterprises. Despite the adoption of carbon management and mitigation actions, 85% of enterprises remain unaware of their marginal abatement costs, limiting informed decision-making and market participation. A comprehensive approach that goes beyond the design of the national ETS is necessary to enhance its effectiveness and efficiency.