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The implications of CO2 price for China’s power sector decarbonization

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  • Li, Ying
  • Lukszo, Zofia
  • Weijnen, Margot

Abstract

China has shown growing interest in market-based CO2 pricing and is expected to establish a nationwide emission trading system by 2016. This study investigates the implications of CO2 price for China’s power sector decarbonization up to 2050, incorporating different scenarios of fuel prices and the development of carbon capture and storage (CCS) technology. An adapted low-carbon generation expansion planning (GEP) model is used to determine the least-cost decarbonization pathways. The implications of the CO2 price are analyzed from the technical, environmental and economic perspectives for 32 scenarios. This study finds that, first of all, a high CO2 price is conducive to achieve a high degree of decarbonization in a cost-effective way, but only if CCS technology is available. Secondly, higher fuel prices undermine or nullify the effect of CO2 pricing on the power decarbonization. Thirdly, the optimal share of renewable energy source (RES) power generation depends on its comparative cost-advantage over CCS-integrated power generation in this study, and the cost-advantage is largely influenced by CO2 prices. Hence, policy makers should coordinate the mandatory targets for RES power generation with CO2 pricing, otherwise, these targets might become redundant or entail extra costs. The findings can be used for China’s policy makers regarding the design of cost-effective power sector decarbonization packages complementing CO2 pricing.

Suggested Citation

  • Li, Ying & Lukszo, Zofia & Weijnen, Margot, 2015. "The implications of CO2 price for China’s power sector decarbonization," Applied Energy, Elsevier, vol. 146(C), pages 53-64.
    • Handle: RePEc:eee:appene:v:146:y:2015:i:c:p:53-64
    DOI: 10.1016/j.apenergy.2015.01.105
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