China is introducing a national carbon emission trading system (ETS), with details yet to be finalized. The ETS is expected to cover only the major emitters but it is often argued that a more comprehensive system will achieve the emission goals at lower cost. We first examine an ETS that covers both electricity and cement sectors and consider an ambitious cap starting in 2017 that will meet the official objective to reduce the carbon-GDP intensity by 60-65% by 2030 compared to 2005 levels. The two ETS-covered industries are compensated with an output-based subsidy to represent the intention to give free permits to the covered enterprises. We then consider a hybrid system where the non-ETS sectors pay a carbon tax and share in the CO₂ reduction burden. Our simulations indicate that hybrid systems will achieve the same CO₂ goals with lower permit prices and GDP losses. We also show how auctioning of the permits improves the efficiency of the ETS and the hybrid systems. Finally, we find that these CO₂ control policies are progressive in that higher incomes households bear a bigger burden.

Emission inventories are critical to understanding the sources of air pollutants, but have high uncertainties in China due in part to insufficient on-site measurements. In this study, we developed a method of examining, screening and applying online data from the country's improving continuous emission monitoring systems (CEMS) to reevaluate a “bottom-up” emission inventory of China's coal-fired power sector. The benefits of China's current national emission standards and ultra-low emission policy for the sector were quantified assuming their full implementation. The derived national average emission factors of SO₂, NO_x and particulate matter (PM) were 1.00, 1.00 and 0.25 kg/t-coal respectively for 2015 based on CEMS data, smaller than those of previous studies that may not fully recognize improved emission controls in recent years. The annual emissions of SO₂, NO_x and PM from the sector were recalculated at 1321, 1430 and 334 Gg respectively, 75%, 63% and 76% smaller than our estimates based on a previous approach without the benefit of CEMS data. The results imply that online measurement with proper data screening can better track the recent progress of emission controls. The emission intensity (the ratio of emissions to economic output) of Northwest China was larger than that of other regions, attributed mainly to its less intensive economy and industry. Transmission of electricity to more-developed eastern provinces raised the energy consumption and emissions of less-developed regions. Judged by 95 percentiles of flue-gas concentrations measured by CEMS, most power plants met the current national emission standards in 2015 except for those in Northwest and Northeast China, while plants that met the ultra-low emission policy were much scarcer. National SO₂, NO_x and PM emissions would further decline by 68%, 55% and 81% respectively if the ultra-low emission policy can be strictly implemented, implying the great potential of the policy for emission abatement.