Abstract:

In 2005,the European Union started to implement the emissions trading scheme. Its implementation will be a serious constraint to China's rapid development of air transport,thereby affecting the macro-economic operation. Under this background,studying the EU ETS to China's economy has large significance. Macroeconomic indicators are separated by use of the VAR-IRF model to explain and reveal the extent,duration and the possible consequences of the impact of the EU ETS on the economy. The results show that changes in the EU ETS tradable carbon-emission-future prices will be in a certain period of time resulting in price increases and even inflation,money supply decreases,as well as foreign trade fluctuations,and ultimately affect the normal operation of China's macroeconomy.

Key words: EU emissions trading system, macroeconomy, VAR-IRF model, impulse response analysis