Assessment of Allowance Mechanismin China's Carbon Trading Pilots

AbstractThe allowance mechanism is one of the core and sensitive aspectsindesign of a carbon trading scheme andaffects the compliance cost for each company covered under the scheme. By examiningChina's allowance mechanismfromtwo aspectsincluding allowance allocation and allowance distribution, this paper comparesChina's carbon trading pilots with the EU Emissions Trading System and CaliforniaCap-and-Trade Program, and through the comparison identify issues that affectthe efficiency of the pilots. The paper also recommends course of actions to strengthen China's existing pilots and buildvaluable experiences for the establishment of the national cap-and-trade system in China