This paper seeks to investigate sulphur dioxide (SO2) emissions trading practice in China and discusses what it might reveal about the suitability of using emissions trading to achieve carbon reductions in China.
The paper explores the Taiyuan SO2 emissions trading program case through interviews with key participants in the scheme. The interview questions are developed from the literature on emissions trading practice and theory.
The Taiyuan SO2 emissions trading program does not seem to be functioning anything like a theoretically ideal model and this brings into question proposals to introduce emissions trading in China. Limitations would seem to be the semi‐free market, the weakness of the legal system and the nature of business‐bureaucracy interactions.
This case study is geographically limited, as are most emissions trading schemes in China and the number of interviewees is relatively small. There was also little historical quantitative data because of the limited records kept in the enterprises and so there is a high reliance on interviewees' recollection.
The evidence suggests that a national carbon trading scheme may not be suitable in China in the short run because the implementation of the program and emissions trading market are very important.
This is the first paper investigating the actual performance of SO2 emissions trading practice in China and also the first one discussing the suitability of using emissions trading to achieve carbon reductions in China based on the existing practice.
