Local emissions trading in developing countries as a transitional strategy toward international greenhouse gas trading: a Beijing example

As is the case in most developing countries, China relies on command-and-control regulation to control air pollution. While it has instituted a modest air pollution levy system in the past 20 years for emissions in excess of standards, the effect on emission levels has been minimal. This paper focuses on how to use emissions trading as a policy instrument to achieve cost-effective reductions in air pollution in Beijing. Emissions or allowance trading has been widely applied to air pollution control in the USA during the past 25 years. Three of the most recent programmes will be examined, which provide applicable experience for possible SO₂ and NO_x trading in the Beijing region. A trading strategy for Beijing will be proposed by comparing the economic and political institutional differences between the USA and China, which could eventually facilitate acceptance of an international greenhouse gas trading system.