Assessment of administrative sanctions of the Chinese emissions trading schemes under proportionality: a law and economics perspective

To mitigate climate change, China has been exploring emissions trading schemes (ETSs) for more than a decade. For example, seven pilot ETSs, including the Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, and Chongqing pilot ETSs, became operational between 2013 and 2014; a national ETS began functioning in 2021. Whether an ETS can harness its strengths to reduce emissions depends on the compliant behaviour of its covered entities, which can be impacted by its sanction regime. Moreover, if the design of sanctions within an ETS is not consistent with the legal principles within domestic legal systems, the legal principles will be a barrier to the implementation of sanctions. This chapter aims to provide a systematic review of the design of current administrative sanctions in China's seven pilot ETSs and the national ETS and to evaluate a typical administrative sanction, that is, fines, under an important administrative law principle – proportionality – from a law and economics perspective. This chapter indicates that the seven pilot and national Chinese ETS sanction regimes do not fully comply with the proportionality principle.