Research Seminar

Linking the EU and Chinese ETS — Malte Winkler

26 Jan 2021


Malte Winkler (Kiel Institute)


Linking the EU and Chinese Emission Trading Systems (ETS) increases the efficiency of reaching greenhouse gas mitigation targets, but both partners will benefit – if at all - to different degrees. Using the global computable-general equilibrium (CGE) model DART Kiel, we evaluate effects of ETS linking in combination with 1) restricted allowances trading, 2) transfer payments compensating China, and 3) altered Armington elasticities, when NDC and NDC-2C targets are met. We find that the EU prefers full linking, while China prefers restricted allowance trading. Transfer payments cannot compensate China sufficiently to make a full link as attractive as restricted trading. Linking can avoid losses from international trade restrictions in the ETS sectors in the sense that gains from linking increase with higher Armington elasticities for China, but decrease for the EU. Welfare losses for China only materialize in one scenario. Overall, the EU and China favor differing options of linking ETS. Moreover, dissimilar impacts on inner-European regions could cause dissent among EU regions which could further increase difficulties in finding a linking solution favorable for all trading partners.


Sonja Peterson (Kiel Institute) – Sneha Thube (Kiel Institute) – Malte Winkler (Kiel Institute)


Online Seminar
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