Allocation of sulphur dioxide allowance – An analysis based on a survey of power plants in Fujian province in China

The rapid growth of the Chinese economy has led to an acceleration of electricity demand, which has enjoyed an annual growth rate above 10% during the past 20 years. However, China’s coal-based resource endowment heavily influences its energy structure in the long term, which will result in more serious environment deterioration, and consequently threaten the sustainable development of China. As an effective pollution control policy that can reduce pollution at the lowest cost, emissions trading is one of the environmental policies that elicit the international interest. In addition, it is also an important economic tool to control sulphur dioxide (SO2) emissions, which has been proved successful in meeting prescribed environmental goals at lower cost than traditional regulate approaches, and now is being pilot-test in China. Since the power industry accounts for more than half of China’s total coal consumption, emissions control in the power industry is the key to realize the emissions reduction objectives claimed in the “Eleventh Five-year Plan”. Based on an investigation of 14 power plants in Fujian province, this article compares four different allocation methods for sulphur dioxide allowance. The results indicate that the emissions performance method and production value method are the most suitable methods for Fujian power plants.

► Different allocation methods will lead to various allowances for plants.
► Production value method is a better mean to the initial allowance allocation.
► Emissions performance method is as well as production value method if used in the same industry.