Chinese Emissions Trading Scheme

This draft paper is to be presented to the IAFA conference on Thursday 18th May 2017. It gives a quick summary of the present seven pilot Emissions Trading Schemes (ETSs) schemes in China a few thoughts on the future risks for the national ETS.

Emission Allowances

I presented a paper at the IAFA doctoral colloquium at NUI Galway in May 2012. It examined the effects of Brent crude, the BNY Mellon Consumer Goods Index, the Spread between gas and coal, and the Stoxx index on the price of EUAs, the European Union Emission Allowances.


Gas fired electricity generation produces about half the CO2 of coal, but coal is the cheaper fuel. When EU Emission Allowance (EUA) prices are taken into consideration this price difference can be reduced or even reversed. The decision to use gas rather than coal on account of EUA prices is known as fuel switching. This preliminary research suggests that an increase in the gas coal spread for electricity production occurred with a reduction in the price of EUAs during 2010-12.

A copy of the presentation may be downloaded from


Benz, E. and, Trück, S., (2009), ‘Modeling the Price Dynamics of CO2 Emission Allowances’, Energy Economics, 31 (1) 4-15.

Chevallier, J., (2009) ‘Carbon Futures and Macro Economic Risk Factors:  A View from the EU ETS’, Energy Economics 31 (4) 614 – 625, July 2009.

Chevallier, J. (2011) ‘A Model of Carbon Price Interactions with Macro Economic and Energy Dynamics’, Energy Economics 33 (6) 1295 – 1312.

Delarue, E.D., Ellerman, A.D. and D’haeseleer, W.D. (2010) Robust MACCs? The Topography of Abatement by Fuel Switching in the European Power Sector’, Energy 35 (3) 1465 – 1475.

Mansanet-Bataller, M., Chevallier, J., Henvé-Mignucci, M. and Alberola, E. (2011) ‘EUA and sCER Phase II Price Drivers: Unveiling the Reasons for the Existence of the EUA – sCER Spread’, Energy Policy 39 (3) 1056 – 1069.

Murray, M.P. (1994) ‘A Drunk and her Dog: An Illustration of Cointegration and Error Correction’, The American Statistician, 48 (1)37-39.

Richter, B. (2010)Beyond Smoke and Mirrors – Climate Change and Energy in the 21st Century’, Cambridge: University Press.

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