Program’s Description Emission trading systems (ETSs) was introduced in 2011 in China due to the problem of growing gas emission and ecological conditions deterioration. China launched pilot programs based on the cap and trade theory in seven regions of the country: Beijing, Tianjin, Shanghai, Chongqing, Hubei, Guangdong, and Shenzhen (Tang et al. 152). China plans to transform these separate pilot ETSs into the nationwide program by 2020 (Cui et al. 1044). Shenzhen’s ETS was the first urban-level cap-and-trade pilot program. It was launched on 18 June 2013. The program was adapted to the city’s economic features. The ETS covered four categories of carbon emission: industry emission, public building, transport, and energy consumption. The ETS covered direct and indirect emissions. The ETS’s regulatory system leads to both improving energy efficiency and decreasing energy demands (Jiang et al. “The Construction of Shenzhen׳s ETS” 18). Ecological and Economic Effects of the Program The Shenzhen’s target is to decrease the total level of gas emission by 21% (“The Construction of Shenzhen׳sETS” 18). Shenzhen is a developing city with high living standards and a growing industry. During 2005-2010 the total level of carbon emission was increased with the annual average rate of 4.9%. After the ETS introduction, the level of emission continues to grow. However, the annual rate of the process has been gradually slowing down. The structure of emission also changed. Nowadays, the city is characterized by a small number of significant direct emission sources and a large number of small sources of emission (Ye et al. 20). Therefore, a positive ecological effect of the ETS introduction could be stated. It could be stated that this scheme affected the economy on the enterprise, regional, and national levels. On the enterprise level, the system leads to optimization of emission purification and allowance trading. Besides, on the regional and national levels, the general tendency of low-carbon production promotion over high-carbon production was predicted. Potentially, the electricity price and carbon price might increase which could result in the promotion of environmentally friendly sources of energy development (Jiang et al. “Research on China’s Cap-and-trade” 909). In Shenzhen, the negative correlation between expected risk and the rate of return was discovered. Besides, the high level of market distortions was caused by ETS regulation. In particular, the negative effect of state control of the market development and emission allowance allocation was stated which affected the allowance price. Thus, to make the program efficient and to turn it into a mature market, more work is needed to be done (Cong and Lo 423). Analysis of the Cap-and-trade Theory Introduction in China The purpose of this program is to decrease the level of carbon emission flexibly, using the market mechanisms instead of strict taxes providing. The cap-and-trade theory is based on the following principle: each region, in particular, Shenzhen city is allowed to produce a certain amount of gas emission. The whole amount is divided into allowances and allocated among all enterprises that emit carbon dioxide. The crucial component of the cap-and-trade