Wang, BanbanJotzo, FrankQi, Shaozhou2021-06-181469-3062http://hdl.handle.net/1885/237820China plans to launch its nationwide Emissions Trading Scheme (ETS) in 2017. Uncertainty in China’s future economic growth rate and its effect on underlying emissions may need to be addressed to ensure stability of the scheme. This article investigates an ex-post cap adjustment mechanism for China’s ETS. An applicable rule for indexation of emissions targets to gross domestic product (GDP) adjustment is presented. Such an ex-post optimal emissions intensity target is estimated in an empirical simulation of the Hubei ETS, a large pilot scheme in a fast-growing Chinese province. And its implications for China’s planned national ETS have been discussed. The article finds that by correcting the emissions cap for the difference between expected and realized GDP, the ex-post adjustment can minimize the abatement costs. It can also limit the influence of uncertainties, as it minimizes the standard deviation of realized abatement, abatement cost, and allowance price for a given expected emissions reduction. In addition, with a limited number of parameters requiring estimation, the ex-post cap adjustment mechanism is feasible. It is consistent with the anticipated design of China’s planned national ETS and could be used alongside other design options such as price corridorsThis work was supported by Australia’s Department of Foreign Affairs and Trade (Australia-China Research Program on Market Mechanisms for Climate Change Policy) [grant number CCA141504] and The National Natural Science Foundation of China [grant number 71503087].application/pdfen-AU© 2017 Informa UK Limited, trading as Taylor & Francis GroupEmissions trading systemflexible mechanismintensity targetuncertainties201710.1080/14693062.2016.12776842020-11-23