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Embargoed until 2018-05-31
Copyright: Wei, Xinyang
Embargoed until 2018-05-31
Copyright: Wei, Xinyang
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Abstract
This thesis studies firm trading behaviour in the European Union (EU) carbon market
and investment decision-making in China’s electricity industry in the context of policies
addressing local and global air pollution. The first two papers derive the lessons learnt
from the EU carbon market for policy-makers (such as the Chinese government)
introducing such instruments, and the last paper assesses the effects of such policies on
investment decisions in the electricity sector.
The first paper aims to provide empirical evidence for beyond compliance trading
behaviour in the EU carbon market by investigating companies’ characteristics and
related volumes. To explore decision-making at the parent company level, a
microeconomic choice model is applied to a unique dataset that contains information on
the EU carbon registry and firm-specific characteristics. The results suggest that Eastern
European state-owned firms are less likely to trade allowances beyond their compliance
needs, and that their volumes are significantly lower. However, Western European stateowned
firms are more active in terms of beyond compliance trading and related
volumes.
The second paper uses a bottom-up approach to analyse value-added tax (VAT) fraud
across all countries involved in the EU Emissions Trading Scheme (ETS) in phase 2.
The results show that the VAT losses for all EU countries are estimated at €3,341
million. The extent of the losses varies for each country, with France having the highest
fraudulent volume. The results also reveal that large-scale VAT fraud significantly
decreased after 2010, which was the result of anti-fraud policies. In addition, VAT fraud
was strongly connected with overseas tax havens, and the Danish registry became a
loophole, which resulted in the prevalence of VAT fraud throughout the EU carbon
market.
The third paper simulates different single and combined policy scenarios to evaluate the
effects of air pollutant control and carbon mitigation policies on China’s future
electricity generation portfolio investment. By using a portfolio assessment model that
incorporates key uncertainties, the results show that China can achieve significant
reductions for both greenhouse gas and local air pollutant emissions through a
combination of climate change and air pollution control policies. In addition, the paper
identifies co-benefits from the perspectives of both air pollutant control and carbon
mitigation, and it discusses the net generation costs of different policy scenarios in the
process of policy evaluation.