Output-based Allowance Allocations under China's Carbon Intensity Target.

Abstract: This paper analyzes the optimal choice of allowance allocation method for the emissions trading system to be established under China''s carbon intensity target. Compared with emission-based allocation, output-based allocation could help to realize the industry''s optimal welfare in a closed trading system and thus is more appropriate for the emissions trading system to be established in China. However, the output-based allocation does face some challenges in the implementation process. An ex-post adjustment approach is proposed to ensure that the allocation rate equals to the carbon intensity target and a conversion factor approach proposed to convert different types of products into the same measure. [Copyright &y& Elsevier]