Allocation of CO2 emission quotas for industrial production in Industry 4.0: Efficiency and equity

[Display omitted] •The industrial sector is divided into two stages: production and trading.•New carbon quotas allocation scheme results in higher efficiency and fairness.•The proposed allocation process combines regional coordination and equity.•Emission reduction pressure: east highest, central moderate, and west lowest. The method of carbon emission quota (CEQ) allocation based on data envelopment analysis (DEA) can allocate quotas without impacting efficiency improvements in industrial sector. A key element in effectively reducing carbon emissions is ensuring accurate efficiency measurement and equitable allocation of CEQ in the Industry 4.0 era. This paper divides industrial system into two stages: production (which more accurately reflects carbon emissions in production) and trading (which involves in the commercial system). Carbon emission efficiency in the production stage is calculated with a DEA model, with a high degree of accuracy. Given that higher efficiency values correspond with stronger capacity to bear the costs of carbon reduction, a CEQ allocation model is proposed which considers the contribution degree of efficiency. This model is applied to China’s industrial production system. The results show that a CEQ allocation scheme that focuses only on the production stage is more equitable than schemes which treat the industrial system as a black box. In allocation schemes which focus only on the production stage, the central region of China is least able to bear the cost of carbon reduction and receives the most CEQ, and the opposite is true in the eastern region of China. The proposed method not only measures the carbon emission efficiency of industrial production more accurately, but also considers the balanced development of different regions when allocating carbon emission rights. The CEQ allocation scheme based on our model can confidently meet the needs of sustainable development in the era of Industry 4.0.