Market-Based Instruments with Chinese Characteristics: The Feasibility of Cap-and-Trade Implementation to Reduce SO2 Emissions in China and the Role of the U.S. EPA

Abstract

The U.S. and Chinese environmental protection agencies have agreed to pursue the use of market-based instruments to reduce sulfur dioxide emissions in China. This report explores the feasibility of using cap-and-trade, a specific type of market-based instrument, in reducing emissions in the current Chinese context. It assesses the political and regulatory feasibility, administrative feasibility, and the economic feasibility of China implementing a cap-and-trade policy to control SO2 emissions.