Pricing Decision Theory and the Empirical Research on International Carbon Emissions Trading

Abstract

This paper, through the literature on carbon emissions trading and the related pricing decision theory, first analyzes the pricing decision principles in the two carbon emissions trading systems, namely, cap and trade and baseline and credit approach; the optimal state for the production and emissions reduction of an enterprise in the context of sufficient market competition is achieved when the marginal emission reduction cost equals the market price of the emission right. Moreover, by referring to relevant researches and based on the equilibrium price at which the marginal emission reduction cost equals the market price of the emission right, the international carbon emissions trading scale in the framework of Kyoto Protocol as well as the unfair benefit allocation is analyzed. Since the developed countries dominate the pricing rights for international carbon emissions trading, from which considerable benefits is gained, there is a necessity for the developing countries to make reasonable assessment and long-term planning in order to avoid the waste of resources resulted from the export at a low price.