Understanding the Impact of an Emissions Trading System on Building Energy Reductions in China

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Rapid economic development in China has led to a significant increase in the number of buildings and building energy usage. According to ASHRAE, buildings in China account for approximately 25% of total energy use and its share is expected to increase as urbanization persists (Zhou et al, 2014, p. 26). Given the growing emphasis on sustainability, China has committed to the United Nations that it will aim to cut its greenhouse gas (GHG) emissions per unit of gross domestic product by 60-65% from 2005 levels (Xinhua, 2015, p. 1). Many of the policies that China has devised to reach this goal pertain to carbon reductions in the building sector. Numerous researches have been done on individual policies that target building carbon or energy reductions such as new building design standards, building retrofit demonstration projects and incentives, and emissions trading systems (ETSs). Few studies, however, have discussed the impact or effectiveness of these policy categories in relation to each other. As such, this research is intended as a comprehensive, coherent study on the building sector’s carbon reduction performance under the influence of related policies and mechanisms, with a specific focus on emissions trading. Carbon trading has served as an effective mechanism to curb carbon emissions in many countries. As one of the largest carbon emitters in the world, China started experimenting with carbon trading since 2011 by implementing local carbon trading in major cities and provinces as part of the “Two Provinces and Five Cities” plan. The ultimate research question that this paper explores is: Has emissions trading been effective in promoting energy and carbon reductions in the building sector in China? What features of program design or other policies would enhance the building sector’s overall energy efficiency? In answering this question, this study will provide an overview of the building stock in China, analyze historical trade data for local ETSs in China that involve building participants, compare the results with those of ETSs that involve buildings, and discuss other policy mechanisms that can complement emissions trading systems in promoting energy and associated carbon reductions in buildings in China. Findings of this paper preliminarily conclude that emissions trading has the potential to induce initial energy reductions in buildings, and its long-term impact on building energy efficiency can be further enhanced if combined with other policy mechanisms that provide tools and resources for relevant stakeholders to undertake deeper retrofits for their facilities.
building energy efficiency, building sector, energy efficiency, building efficiency, emissions trading, carbon trading, China