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Combining mandatory coal power phaseout and emissions trading in China's power sector

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  • Yu, Zhongjue
  • Geng, Yong
  • Calzadilla, Alvaro
  • Wei, Wendong
  • Bleischwitz, Raimund

Abstract

China has launched its nationwide emissions trading system (ETS) in the power sector. Meanwhile, a mandatory phaseout policy for coal power is likely to be co-existing with China's nationwide ETS. These co-existing policies would interact with each other and, in certain cases, lead to unintended consequences, such as a policy overlap. This study aims to assess the impact of such combined policy in China by developing a multi-regional dynamic Computable General Equilibrium (CGE) model with specified modules of mandatory coal power phaseout and ETS. The results show that the impact of such policy combination depends on the type of ETS. Under China's current rate-based ETS, the co-existence of mandatory coal power phaseout would enhance the policy stringency and increase the coal power generation losses, carbon emission and intensity reductions. In contrast, the mass-based ETS with the combination of mandatory coal power phaseout would lead to a policy overlap and potential market failure in the ETS. The complementary provincial impacts and permit scarcity are two factors that could explain the combination mechanism of these policies. Furthermore, permit cancellation in a mass-based ETS would prevent the potential market failure but may lead to greater economic losses.

Suggested Citation

  • Yu, Zhongjue & Geng, Yong & Calzadilla, Alvaro & Wei, Wendong & Bleischwitz, Raimund, 2023. "Combining mandatory coal power phaseout and emissions trading in China's power sector," Energy Economics, Elsevier, vol. 122(C).
    • Handle: RePEc:eee:eneeco:v:122:y:2023:i:c:s0140988323001925
    DOI: 10.1016/j.eneco.2023.106694
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    Cited by:

    1. Liu, Feng & van den Bergh, Jeroen & Wei, Yihang, 2024. "Testing mechanisms through which China's ETS promotes a low-carbon transition," Energy Economics, Elsevier, vol. 132(C).
    2. Xin-gang, Zhao & Shuran, Hu & Hui, Wang & Haowei, Chen & Wenbin, Zhang & Wenjie, Lu, 2024. "Energy, economic, and environmental impacts of electricity market-oriented reform and the carbon emissions trading: A recursive dynamic CGE model in China," Energy, Elsevier, vol. 298(C).
    3. Mei, Yueru & Geng, Yong & Chen, Zhujun & Xiao, Shijiang & Gao, Ziyan, 2024. "Ensuring the sustainable supply of semiconductor material: A case of germanium in China," International Journal of Production Economics, Elsevier, vol. 271(C).

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