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Emissions trading and abatement cost savings: An estimation of China's thermal power industry

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  • Ke Wang
  • Xian Zhang
  • Xueying Yu
  • Yi-Ming Wei

    (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)

  • Bin Wang

Abstract

This study evaluates the efficiency advantage of a market-based emission permit trading policy instrument over a command and control policy instrument in the case of China's thermal power industry. We estimate the unrealized gains achievable through emission permit trading with an optimization frontier analysis. These unrealized gains include potential recoveries of electricity generation through eliminating spatial and temporal regulatory rigidity on emission permit trading. The results of an ex post estimation during 2006 and 2010 indicate a potential gain of 8.48% increase in electricity generation if both the intra- and inter-period regulatory rigidities CO2 emission permits trading had been eliminated. In addition, if the permit trading systems for three air pollutions, CO2, SO2, and NOx, had been completely integrated, a positive net synergy effect of 1.43% increase in electricity generation could have been secured. The unrealized gains identified in this study provide supports for establishing a nationwide emission permit trading system in China.

Suggested Citation

  • Ke Wang & Xian Zhang & Xueying Yu & Yi-Ming Wei & Bin Wang, 2016. "Emissions trading and abatement cost savings: An estimation of China's thermal power industry," CEEP-BIT Working Papers 95, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    • Handle: RePEc:biw:wpaper:95
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    Cited by:

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    3. Enci Wang & Jianyun Nie & Hong Zhan, 2022. "The Impact of Carbon Emissions Trading on the Profitability and Debt Burden of Listed Companies," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    4. Wang, Ke & Yang, Kexin & Wei, Yi-Ming & Zhang, Chi, 2018. "Shadow prices of direct and overall carbon emissions in China’s construction industry: A parametric directional distance function-based sensitive estimation," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 180-193.
    5. Chang, Kai & Ge, Fangping & Zhang, Chao & Wang, Weihong, 2018. "The dynamic linkage effect between energy and emissions allowances price for regional emissions trading scheme pilots in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 415-425.
    6. Yongrok Choi & Yunning Ma & Yu Zhao & Hyoungsuk Lee, 2023. "Inequality in Fossil Fuel Power Plants in China: A Perspective of Efficiency and Abatement Cost," Sustainability, MDPI, vol. 15(5), pages 1-15, March.
    7. Wei, Xiao & Zhang, Ning, 2020. "The shadow prices of CO2 and SO2 for Chinese Coal-fired Power Plants: A partial frontier approach," Energy Economics, Elsevier, vol. 85(C).
    8. Chen, Zhenling & Zhao, Weigang & Zheng, Heyun, 2021. "Potential output gap in China's regional coal-fired power sector under the constraint of carbon emission reduction," Energy Policy, Elsevier, vol. 148(PA).
    9. Chen, Zhenling & Yuan, Xiao-Chen & Zhang, Xiaoling & Cao, Yunfei, 2020. "How will the Chinese national carbon emissions trading scheme work? The assessment of regional potential gains," Energy Policy, Elsevier, vol. 137(C).
    10. Chen, Zhenling & Li, Jinkai & Zhao, Weigang & Yuan, Xiao-Chen & Yang, Guo-liang, 2019. "Undesirable and desirable energy congestion measurements for regional coal-fired power generation industry in China," Energy Policy, Elsevier, vol. 125(C), pages 122-134.
    11. Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2018. "Environmental efficiency and abatement efficiency measurements of China's thermal power industry: A data envelopment analysis based materials balance approach," European Journal of Operational Research, Elsevier, vol. 269(1), pages 35-50.
    12. Zhang, Weijie & Yu, Yanni & Liu, Qingjun, 2024. "Is single or synergistic environmental permit trading system more effective? A study based on Chinese industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).
    13. Bingxin Zeng & Jun Xie & Xiaobing Zhang & Yang Yu & Lei Zhu, 2020. "The impacts of emission trading scheme on China’s thermal power industry: A pre-evaluation from the micro level," Energy & Environment, , vol. 31(6), pages 1007-1030, September.
    14. Qibao Shi & Weina Xu, 2023. "Low-Carbon Path Transformation for Different Types of Enterprises under the Dual-Carbon Target," IJERPH, MDPI, vol. 20(6), pages 1-14, March.
    15. Feng Dong & Yifei Hua & Bolin Yu, 2018. "Peak Carbon Emissions in China: Status, Key Factors and Countermeasures—A Literature Review," Sustainability, MDPI, vol. 10(8), pages 1-34, August.
    16. Ke Wang & Yi-Ming Wei & Zhimin Huang, 2017. "Environmental efficiency and abatement efficiency measurements of China¡¯s thermal power industry: A data envelopment analysis based materials balance approach," CEEP-BIT Working Papers 108, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.

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    More about this item

    Keywords

    Data envelopment analysis; CO2 emissions; Regulatory rigidity; Synergy effect; Tradable permits;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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