The primary benefits of the Nationwide Emission Trading Scheme in China

Confronted with the accelerating global warming, humans need to take tremendous efforts to decelerate global temperature rise. Climate policy is believed to be effective to cope with climate change; particularly, emission trading scheme (ETS) can significantly curb carbon emissions, thereby decelerating global warming and reducing climate damage. In this paper, we have designed an integrated assessment model (IAM) to analyze primary benefit of the ETS in China as a case study. Primary benefit is defined as avoided damage from warming impacts on sea level, crop yield, labor productivity, and labor health. The IAM results show that the global temperature will rise by 0.7 °C in 2021–2030 under the current mitigation efforts; this temperature rise causes GDP loss. The ETS has significant and negative effects on labor input, whereas primary benefit of the ETS slightly increases labor input. The quantified primary benefit in this paper is much lower than abatement cost, as we have only quantified primary benefit locally where the ETS is implemented. This finding implies that neglecting global climate benefit, regional climate policy tends to be unattractive to policymakers; in other words, there is a free-rider issue in designing climate policy.