Decarbonization efforts hindered by China’s slow progress on electricity market reforms

The reform of China’s electricity generation to move from a centrally planned operation (CPO) to a market-based system has progressed slowly over the past decade. The slow reform pace hindered the market-share reallocation over power plants with divergent carbon intensity and thus locked the carbon trajectory of China’s power sector. Here we analyse the effects of the delayed electricity market reform in terms of CO2 emissions. Constrained by a sequence of unique fairness regulations, a multi-timescale dispatch model is developed to quantify the CPO-induced CO2 emissions from China’s power sector. We find that continuing to generate electricity through the CPO has produced an additional 3 GtCO2 emissions over 2011–2019, an amount equivalent to the total emissions of India, which is the world’s fourth-largest carbon emitter. In some provinces, the level of extra emissions accounts for up to 20% of the annual power-related greenhouse gas (GHG) emissions. We find that national level GHG emissions have increased because the CPO over-allocated ~30% of the market shares of electricity generation to high-carbon power plants, including those in provinces that have been implementing energy-saving operation policies. In addition, we find the China’s growing investment in generation capacity has exacerbated the GHG emissions impact of the CPO, whereas China’s investment in fuel efficiency improvement has reduced CPO-related emissions by over 13%. Our discoveries manifest that the economic institution and its transition in the energy sector can substantially impact the GHG trajectory and thus play a critical role of the sustainability of human society.