EFFECTIVENESS OF EMISSIONS TRADING UNDER THE UPDATED NATIONAL EMISSIONS TARGETS BY 2030

Abstract

 According to the Paris Agreement, the parties are required to update their national emission reduction targets (NDCs) every five years. Emissions trading can be an economically efficient option to realize the condition of updated NDCs. This study made the economic assessment of implementing updated NDCs and quantified the effects of emissions trading using a global computable general equilibrium model. The results showed that updates of NDCs brought an increase in GDP loss mainly in developed countries relative to outdated NDCs. The introduction of emissions trading mitigates GDP losses across the world, but increased those in some developing countries where the level of emission reduction targets is relatively lower. While emissions trading can promote emissions reductions in the global level cost-effectively, it imposes a heavy economic burden on some developing countries. Thus, it simultaneously implied the importance of considering emission allocation schemes and providing additional financial supports to developing countries.