Incorporating the transport sector into carbon emission trading scheme: an overview and outlook

The transport sector is a major consumer of fossil fuels and, consequently, one of the largest sources of greenhouse gas emissions and air pollutant emissions. In recent years, global transport’s emissions have experienced a remarkable increase and will become a crucial cause of global warming in the next few decades. The public has become well aware of the issues regarding carbon emissions in this sector, and reducing greenhouse gases has also become a regulatory agenda of governments around the globe. Emissions trading schemes are considered one of the most cost-efficient ways of controlling greenhouse gas emissions and have been implemented by many countries around the world. While several countries have already incorporated the transport sector into their emissions trading schemes, China is in the process of incorporating a part of the transport sector into its emission trading scheme pilots. Introducing a market mechanism to reduce carbon emissions in the transport sector is still at a nascent stage and much is still to be explored. This paper explores the current development and challenges of applying carbon trading mechanisms in the transport sector around the world. Then, the paper analyzes the policies and current developments of incorporating the transport sector in China’s carbon trading pilots. Several suggestions are then provided in regard to options on transport sector entities coverage, initial allowance allocation models, integration of carbon trading policies with existing policies, collection of transportation statistics and rolling out a nationwide carbon trading system.