Carbon emissions reduction in China's container terminals: Optimal strategy formulation and the influence of carbon emissions trading. (10th May 2019) - Zhong, Huiling
Abstract: To reduce CO2 emissions, the Chinese government has established a carbon emissions trading scheme, with industrial enterprises being allocated free emissions quotas and buying permits on the carbon market for over-quota emissions. Enterprises, including container terminals, must also progressively reduce their carbon emissions intensities and will be affected by the costs associated with reducing emissions as well as by carbon trading expenses. Therefore, in this study, the costs of carbon reduction (e.g., equipment changes, management interventions, and carbon trading) are calculated, and a nonlinear programming model is developed to formulate an optimal strategy of measures for a terminal enterprise to meet its statutory emissions-reduction target while minimizing the associated expenditure. In addition, the specific effect of carbon trading (using the free emissions quota percentage or FEQP and the carbon trading price or CTP) on a terminal's optimal emissions-reduction strategy is examined. Using the case of Nansha terminal over a five-year period, the model results show that under the current FEQP and CTP, the carbon trading expenses constitute only 0.1% of the total expenditure on carbon-reduction measures. Therefore, the current values of the FEQP and CTP provide very little incentive for terminals to reduce emissions. Sensitivity analysis shows that under a decreasing FEQP, the terminal's expenses increase linearly but the emissions amount decreases stepwise. An increase in the CTP from 40 to 190 Yuan/t increases the terminal's expenses linearly and decreases its emissions stepwise, but emissions show no further decrease for a CTP of 190–370 Yuan/t. The findings have implications for policy-making as well as for terminals' carbon-reduction strategies and costs. Highlights: Develop a model for the optimal carbon-reduction strategy for container terminals. Model analyzes effect of China's emissions trading scheme (ETS) on enterprise costs. China's ETS gives insufficient incentive for enterprises to reduce carbon emissions. Study effect of free emissions quota percentage (FEQP) and carbon trading price (CTP). China's ETS should be divided into stages based on identified values of FEQP and CTP.