Impacts of Transaction Costs on Cost Saving Effect of Carbon Trading Market in China

Abstract

Abstract:

Transaction costs play a significant role in cost saving of carbon trading market.In this paper,we develop an inter-provincial carbon-trading model to theoretically examine the relationships between transaction costs and equilibrium carbon price and trading volumes,and empirically analyzing the impacts of transaction costs on cost-effectiveness of China's carbon trading market.We find a positive relationship between equilibrium carbon price and transaction costs,and a negative relationship between transaction costs and trading volumes.Specifically,increase of the transaction cost by each unit leads the equilibrium price to increase by 0.57 Yuan and the trading volume to decrease by 0.31 million tons.Besides,the rising of transaction costs heavily restrains the trading initiative of market agents,then weakens the cost-effectiveness of permits trading market.As the transaction cost increases,Tianjin and Shanghai would be the first two agents staying out of the trading market;if the marginal transaction cost crosses the threshold of 70 Yuan per ton of CO₂,the trading market will be in failure.This paper emphasizes the importance of transaction costs in mechanism design of carbon trading market,and indicates the policy makers should pay attention to the transaction costs for establishing the national united carbon trading market in the future.

Key words: transaction cost, inter-provincial carbon trading market, cost saving effect

Cui Lianbiao, Duan Hongbo, Xu Jinhua. Impacts of Transaction Costs on Cost Saving Effect of Carbon Trading Market in China[J]. , 2017, 29(6): 23-31.

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