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Carbon Pricing and Electricity Market Reforms in China

Author

Listed:
  • Jin Fan

    (School of Management, University of Science and Technology of China)

  • Dingtao Zhao

    (School of Management, University of Science and Technology of China)

  • Yanrui Wu

    (University of Western Australia)

  • Jiuchang Wei

    (School of Management, University of Science and Technology of China)

Abstract

As a large emerging economy, China is exploring to establish a carbon pricing system to mitigate greenhouse gas emissions. The electricity sector which generates the greatest amount of China's carbon dioxide (CO2) emissions should be covered by such a carbon pricing system. The review of the three main stages of China's electricity market reforms shows that the degree of electricity marketization is relatively low, which might become an obstacle to carbon pricing. This paper develops theoretical and empirical models to analyze the impacts of carbon pricing on electricity supply under two scenarios, namely, marketization and regulation. It is concluded that the electricity market reform is a prerequisite for the development of carbon pricing. Without market-oriented reforms of electricity pricing in China, carbon pricing might lead to a shortage in electricity supply. Potential electricity market reforms to encourage market competition and promote market-oriented electricity-pricing are also suggested.

Suggested Citation

  • Jin Fan & Dingtao Zhao & Yanrui Wu & Jiuchang Wei, 2014. "Carbon Pricing and Electricity Market Reforms in China," Economics Discussion / Working Papers 14-03, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:14-03
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    Cited by:

    1. Xu, Xiaofeng & Cui, Xiaodan & Chen, Xiangyu & Zhou, Yichen, 2022. "Impact of government subsidies on the innovation performance of the photovoltaic industry: Based on the moderating effect of carbon trading prices," Energy Policy, Elsevier, vol. 170(C).
    2. Li, Yan & Feng, Tian-tian & Liu, Li-li & Zhang, Meng-xi, 2023. "How do the electricity market and carbon market interact and achieve integrated development?--A bibliometric-based review," Energy, Elsevier, vol. 265(C).
    3. Weng, Qingqing & Xu, He, 2018. "A review of China’s carbon trading market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 613-619.
    4. Wu, Wei & Lin, Boqiang, 2018. "Application value of energy storage in power grid: A special case of China electricity market," Energy, Elsevier, vol. 165(PB), pages 1191-1199.
    5. Fan, Jin & Wang, Shanyong & Wu, Yanrui & Li, Jun & Zhao, Dingtao, 2015. "Buffer effect and price effect of a personal carbon trading scheme," Energy, Elsevier, vol. 82(C), pages 601-610.
    6. Ding Ding, 2022. "The impacts of carbon pricing on the electricity market in Japan," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-8, December.
    7. Jia, Zhijie & Lin, Boqiang & Wen, Shiyan, 2022. "Electricity market Reform: The perspective of price regulation and carbon neutrality," Applied Energy, Elsevier, vol. 328(C).
    8. Peng, Xu & Tao, Xiaoma, 2018. "Cooperative game of electricity retailers in China's spot electricity market," Energy, Elsevier, vol. 145(C), pages 152-170.

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