Allocation of carbon permits within regions and its regional economy impact: a multi-regional general equilibrium analysis

In the 12th Five-Year Plan of China proposed in 2011, China carried out the target to reduce its economy’s carbon intensity by 17 percent by 2015 compared to 2010 levels. To achieve this goal, seven carbon emissions trading pilots have been established to find a way for the unified national carbon trading market. In China, regional differences and interregional economic linkages have played key roles in China’s regional economy development and spatial structure formation. To get a national target, each region will have a different contribution. Difference of initial quota allocation and emission reduction cost among provinces in China is the driving force of unified national carbon trading market. The initial quota allocation of carbon permits will have important effects on regional economic development, industrial structure and interregional trading. Therefore, the allocation of the emission reduction target at the provincial level may not only take regional economic development into consideration, but also the regional reduction potential to achieve the goal, while at the same time emphasizing regional equity and a regional development strategy.