Abstract:

Both carbon tax and ETS are the environmental management tools to control greenhouse gas emissions, but they may bring different effects about mitigation cost for various industries. Building the GHGs mitigation cost function which based on the steady-state expect social cost function of pollution control policies, and employing it to compare the emission reductions cost of cement industry under the carbon tax or ETS to find the key influence factors for cutting cost. Taking Guangdong and Shandong provinces’cement industry as empirical example, the following conclusions can be conducted: when there is little difference between the carbon price and carbon tax rate, the carbon tax will be more cost effective than ETS, due to ETS’s higher construction cost. In the short term, because the higher cost of emission reductions of using new technology under mandatory administrative rules, ETS is more cost effective. There are some key factors to impact enterprise’s mitigation cost: carbon price, carbon tax rate, the price of the best available technology, enterprise anticipation, ETS construction costs, which will affect the comparative advantage of ETS and carbon tax on the emission reductions costs. At last, We suggest to design a kind of complementary carbon emission management policies, making the carbon tax and ETS play their respective advantages.

Key words: ETS, carbon tax, cost of emission reductions, the cement industry, Guangdong province