Shi, XunpengWang, KeShen, YifanSheng, YuZhang, Yanfang2025-12-162025-12-160959-6526ORCID:/0000-0002-8467-6213/work/173374589https://hdl.handle.net/1885/733795272Restriction the production and consumption of fossil fuels is a necessary part in the energy transition. How to implement such restriction effectively is an issue that is of public interest to both academia and policy makers. Using production data of more than 1100 coal mines in China, we show that a capacity permit trading system originated from cap and trade practice could help the coal industry to save more than 30 percent of inputs and increase income by 26 percent. The results also demonstrate that the permit trading will lead to Pareto improvement for all participating provinces when compared with the capacity control administratively, and the accumulative welfare will increase as the trading zone is enlarged. The study suggests that adopting the permit trading schemes for capping policies is economically beneficial and politically feasible.This work is supported by the National Natural Science Foundation of China (Grant Nos. 71871022 , 71828401 , 71471018 , 71521002 ), the Fok Ying Tung Education Foundation (Grant No. 161076 ), the National Key R&D Program (Grant No. 2016YFA0602603 ), the Training and Practice Base for Innovative Energy Talents , the Joint Development Program of Beijing Municipal Commission of Education , and the National Program for Support of Top-notch Young Professionals .enPublisher Copyright: © 2020 Elsevier LtdCap and tradeChinaCoalPermit trading schemeProduction capacity control2020-05-2010.1016/j.jclepro.2020.12047285079318699