With the development of environmental science, governments and international organizations are becoming aware of the importance of environmental protection. Environmental protection economics has become an important part of the development of global economic patterns. Theoretically, environmental economics can be traced back to a relatively old period in the history of economics – from the 1870s to the present day. As one of the key theoretical foundations of the developed West countries, the study and innovation of economics has always led to the transformation and development of the entire socio-economic form in a higher and stronger direction. Since the mid-1960s, population growth and resource shortages have become increasingly serious, and the demand for natural resources from economic activities has increased significantly, making the pollution caused by economic activities become more and more prominent, which together have contributed to major changes in human living conditions and directly affected the development of environmental economics, making environmental economics a diverse and marginal field. As economic and social development continues, the contradiction between environmental protection and economic development will become more and more acute. The value of environmental resources will become more and more important and recognized. After decades of development, the rational use of resources, the protection of the environment and the reduction of pollution emissions are important theories in environmental economics, which also have a great impact on human life.

From the end of the 19th century to the beginning of the 20th century, environmental economics was introduced into practice through a series of theoretical innovations and rapidly spread and applied. One of the main application scenarios of environmental economics when it comes to carbon emissions trading is that this involves two aspects. On the one hand, at the international level, international coalitions led by developed countries are taking the lead in introducing carbon tariffs and imposing more import duties on environmentally polluting companies. On the other hand, the world’s leading economies are actively promoting the formation of domestic carbon emissions trading markets. Environmental issues have always been a major challenge for all countries, and therefore how to protect and improve the environment in the process of economic development has become one of the global concerns. The core concept of environmental economics is to view, analysis and solve environmental problems from a long-term perspective, with the emphasis on minimizing the consumption of natural resources and achieving a balance between minimizing the impact of human activities and maximizing economic benefits.

Within countries, developed and, to a lesser extent, developing countries, trade carbon credits to achieve the goal of reducing greenhouse gas emissions and protecting the environment. “Carbon credits are the rights of enterprises to emit greenhouse gases into the atmosphere, and are a special, scarce and valuable economic resource, closely linked to finance and the green low-carbon economy. At present, carbon trading systems have not been widely implemented in countries around the world. But for some markets with large carbon emissions, some countries have started piloting them ahead of time. China has been gradually building a mechanism for carbon emissions trading into the country’s electricity system since 2011. Under the operation of this mechanism, as of 31 December 2021, the cumulative volume of carbon emission allowances traded in the pilot carbon market was 483 million tons, with a turnover of RMB 8.622 billion. Japan has implemented carbon pricing mechanisms mainly for the domestic market, including the global warming countermeasures tax known as Japan’s carbon tax, carbon emissions trading and credit trading, all of which have established a basic framework; cross-border carbon pricing mechanisms are mainly for the limited countries of the joint credit system between the two countries, and the carbon border adjustment mechanism is still under discussion.

For the national level, the main effects of the introduction of a carbon emissions trading market are fourfold: Firstly, the price mechanism will stimulate market players to reduce emissions, thus promoting investment in carbon-neutral equipment and technological innovation, which will not only be reflected in the growth of gross domestic product (GDP), but will also be beneficial for revitalizing a country’s economy, increasing market dynamics, increasing employment and fostering high-tech talent. Secondly, social capital will flow to industries that are more in line with the trend of carbon neutrality, thus contributing to the transformation and upgrading of Japan’s industrial structure, which is conducive to grasping the direction of industrial development and maintaining long-term competitiveness under the global wave of carbon neutrality; thirdly, it can expand exports of low-carbon-related products and services, thus increasing the support of external demand for Japan’s economic growth; finally, the price mechanism Finally, the price mechanism can play a good social publicity effect, thus leading consumers to shift to low-carbon consumption patterns, and finally, the improvement of the environment is also conducive to sustainable social development and the realization of synergistic development of the economy and the environment. In two countries mentioned above, from 2015 to 2020, China’s proportions of clean energy in total energy consumption has risen from 15% to 24.3% and Japan’s has risen from 17% to 23%, which can be even more higher if the market was not showing worry about Fukushima nuclear accident. 

By JIN Kaiwei