Study on the cost-effectiveness of paid use policy of pollutant emission allowance in China

In order to analyze the cost-effectiveness of the paid use policy of pollutant emission allowance and the environmental tax policy on the emission trading market in China, the principles of promoting enterprise pollutant emission reduction by three environmental management instruments (i.e. emission trading, paid use of pollutant allowance, and environmental tax) were analyzed, based on the principles of emission trading. After that, ten virtual enterprises were set up to simulate and analyze the cost-effectiveness of different policy scenarios. The results showed that the coexistence of three policy instruments had no effect on the emission trading of enterprises when the emission trading policy was dominant. Meanwhile, the role of the paid use policy of pollutant emission allowance and the environmental tax policy in the emission trading market was the same; both could reduce the transaction price of the emission allowance and increase pollutant abatement cost. If the paid use price of pollutant emission allowance or the environmental tax rate (or the sum of both) exceeded the marginal abatement cost of the enterprises when the original emission trading market was balanced, the emission trading market would appear "failure" phenomenon, which meant that the enterprises would no longer seek to carry out the emission trading, but pay the compensated fee for the use of pollutant emission right or the environmental tax (or both).