A carbon emission trading policy option for China — Learning from world-leading fishery and water management systems

Dr Xin Chen

Associate Professor Xin Chen

The Centre for Global Food and Resources hosts regular seminars throughout the year on a broad range of relevant issues. We feature presenters from a wide range of disciplines who share their knowledge and experience in easily-accessible one-hour seminars.


Topic: A carbon emission trading policy option for China — Learning from world-leading fishery and water management systems

Since 2013 China, in an effort to reduce carbon emissions, has been testing seven pilot trading system. These pilots, however, have been characterized by poor liquidity and concentrated trading. Seeking a solution to these institutional problems, we draw upon experience from world-leading experience in fishery and water sharing systems. Sharing systems are unique and differ from conventional emissions trading systems in their reliance upon two, rather than one market mechanisms. Once a robust sharing system is put in place, participants soon learn that share value increases as transaction costs decline and, also, as the scarcity of opportunity increases. Sharing systems are unique also in their capacity to facilitate ongoing adjustment and national and international expectations change. Once the necessary accounting and registration systems have been put in place, implementation is achieved by making a once-off share allocation and, once this share allocation had been made, distributing emissions allowances in proportion to the number of shares held. Efficiency is achieved by making both shares and allowances tradable. Fairness can be brought to the system by introducing a dynamic share adjustment mechanism. Pragmatically and with careful design, implementation could begin in the electricity sector and, once institutional capacity had been established, coverage extended to other sectors. Successful implementation would be contingent on the establishment of a share register and an emission accounting system. Policy uncertainty can be reduced by allowing participants to mortgage shares and use this mechanism to fund the capital investment necessary to enable them to reduce emissions. If China chose to implement such a scheme, allowance trading would enable companies to efficiently manage emissions on a just-in-time daily basis while share trading would enable companies to protect investment decisions and manage long-term risk.


Xin Chen is the visiting scholar of our GFAR, an Associate Professor from Xi’an International Studies University in China. Her research interests focus on Environmental Finance and Rural Finance. She has published several papers on China’s carbon emission trading market and her book-“The research on the price of China’s carbon trading market” has attracted a lot of attention. Xin Chen is the Evaluation Expert of China’s Ministry of Education and holds the Master Tutor position in her Economics and Finance School While in Australia Xin Chen will be working with Professor Mike Young from GFAR.

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