Carbon dioxide emissions allocation: A review

Carbon dioxide (CO2) emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level. Past decades have seen the development and applications of various methods for CO2 emissions allocation. This paper provides a literature review of CO2 emissions allocation with emphasis on the evolution of allocation methods used. It begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods. We then classify the existing allocation methods into four groups, namely indicator, optimization, game theoretic and hybrid approaches. The main features and findings of past studies are identified and summarized. While the fairness principle prevails in earlier studies, the efficiency principle has been found to receive increasing attention recently. We also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results. Issues related to selecting appropriate methods in CO2 emissions allocation are finally discussed. Further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible.