Carbon trading in a socialist market economy: Can China make a difference?

Abstract

A global carbon trading system has gained shape since several major Asia-Pacific economies declared their participation. As the largest national source of greenhouse gases, China is probably the most prominent newcomer. Pilot emission trading schemes are being introduced in this country with prospects for developing into a national scheme. The initiative is primarily motivated by expected economic benefits rather than environmental commitments. Viability is uncertain due to the absence of a liberal political-economic system as we know in the western world. The theory of carbon trading is being tested in an unusual place, with huge implications, both practically and theoretically.