How to Allocate Carbon Emission Permits Among China's Industrial Sectors Under the Constraint of Carbon Intensity?

With the official launch of China's national unified carbon trading system (ETS) in 2017, it has played an increasingly important role in controlling the growth of carbon dioxide emissions. One of the core issues in carbon trading is the allocation of initial carbon emissions permits. Since the industry emits the largest amount of carbon dioxide in China, a study on the allocation of carbon emission permits among China's industrial sectors is necessary to promote industry carbon abatement efficiency. In this study, industrial carbon emissions permits are allocated to 37 sub-sectors of China to reach the emission reduction target of 2030 considering the carbon marginal abatement cost, carbon abatement responsibility, carbon abatement potential, and carbon abatement capacity. A hybrid approach that integrates data envelop analysis (DEA), the analytic hierarchy process (AHP), and principal component analysis (PCA) is proposed to allocate carbon emission permits. The results of this study are as follows: First, under the constraint of carbon intensity, the carbon emission permits of the total industry in 2030 will be 8792 Mt with an average growth rate of 3.27%, which is 1.57 times higher than that in 2016. Second, the results of the carbon marginal abatement costs show that light industrial sectors and high-tech industrial sectors have a higher abatement cost, while energy-intensive heavy chemical industries have a lower abatement cost. Third, based on the allocation results, there are six industrial sub-sectors that have obtained major carbon emission permits, including the smelting and pressing of ferrous metals (S24), manufacturing of raw chemical materials and chemical products (S18), manufacturing of non-metallic mineral products (S23), smelting and pressing of non-ferrous metals (S25), production and supply of electric power and heat power (S35), and the processing of petroleum, coking, and processing of nuclear fuel (S19), accounting for 69.23% of the total carbon emissions permits. Furthermore, the study also classifies 37 industrial sectors to explore the emission reduction paths, and proposes corresponding policy recommendations for different categories.