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Study on the impact of emission trading scheme on technological progress of power generation sector in China: A perspective from energy transition

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  • Sun, Kege
  • Zhou, Fengqi
  • Liu, Xinyu

Abstract

Green energy transition from fossil fuels to wind and solar is inevitably driven by environmental and climate policy. How the emission trading scheme (ETS) influences energy transition in China deserves to be analyzed in the context of carbon neutrality. This study analyzes the impact of ETS on neutral and biased technological progress of China's power generation sector by decomposing the power sector by generation technology in a translog cost function. It then analyzes how the ETS pilot policy brings about biased technological progress between different generation technologies using difference-in-differences and synthetic control methods. The results show that ETS pilot policy contributes to green energy transition by bringing about neutral technological progress of China's power generation sector, utilization rate decrease of thermal power capacity and stimulating generation units' upgradation of the thermal power sector. Although China's energy transition is remarked by substitution of thermal power sector with variable renewable energy sector, there is no evidence that ETS pilot policy has contributed to this trend. However, it inhibits innovation of variable renewable energy in pilot regions. It is necessary for the government to take measures to strengthen ETS policies' impact on energy transition through supporting innovation and expansion of the VRE sector.

Suggested Citation

  • Sun, Kege & Zhou, Fengqi & Liu, Xinyu, 2024. "Study on the impact of emission trading scheme on technological progress of power generation sector in China: A perspective from energy transition," Energy, Elsevier, vol. 302(C).
    • Handle: RePEc:eee:energy:v:302:y:2024:i:c:s0360544224015238
    DOI: 10.1016/j.energy.2024.131750
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