The economic impacts of introducing CCER trading and offset mechanism into the national carbon market of China

doi:10.12006/j.issn.1673-1719.2022.055

Abstract

Abstract:

Based on current situation and development trend of wind power and photovoltaics Chinese Certified Emission Reduction (CCER) in China, a variety of policy scenarios were set up for CCER supply, offsetting and price formation and other key mechanisms. Under the background of the cancellation of wind power and photovoltaics price subsidies, a recursive dynamic Computable General Equilibrium (CGE) model with distinguished disaggregation in the electric power sector was developed to simulate the economic impacts of introducing wind power and photovoltaic CCER trading and offsetting mechanisms in the national carbon market. The results show that the introduction of wind power and photovoltaic CCER trading and offsetting mechanisms will reduce the carbon quota price and is also beneficial to ease the negative impact of the cancellation of wind power and photovoltaics price subsidies on these two electric power sectors, but it will weaken the carbon emission reduction effect of the national carbon market, and the effects will be more obvious with the increase of the total supply of CCER. After the introduction of wind power and photovoltaic CCER trading and offsetting mechanisms, industries with higher carbon emission intensity will choose to purchase more CCER, among which the thermal power industry will be the main buyer of CCER. If the register and approval of CCER will not be restarted in the future, the wind power industry will be the main beneficiary. However, if the register and approval of CCER can be restarted and its supply continues to increase year by year, both wind power and photovoltaic industries will benefit. Therefore, the total amount of initial carbon quota setting needs to be moderately tight when introducing CCER trading and offsetting mechanisms into national carbon market, China can consider restarting register and approval of CCER projects in the near future, but the upper limit of the allowable CCER settlement ratio should be reasonably set in combination with carbon emission reduction targets in order to avoid a great negative impact on the carbon emission reduction effect of the national carbon market.

Key words: National carbon market, Chinese Certified Emission Reduction (CCER), Wind power, Photovoltaics, Computable General Equilibrium (CGE) model, Economic impacts

ZHANG Ning, PANG Jun. The economic impacts of introducing CCER trading and offset mechanism into the national carbon market of China[J]. Climate Change Research, 2022, 18(5): 622-636.

Figures/Tables 10

Fig. 1 The nested structure of production function in the CGE model

Table 1 The sector categories in the CGE model

Table 2 Policy scenarios for the simulation

Table 3

Table 4 The quantity of CCER purchased by each carbon trading industry under different scenarios in 2030 106 t CO2

Table 5 The trading quantity and value of carbon permits under different scenarios in 2030

Table 6

Table 7 The change rate of total carbon emissions under different scenarios %

Table 8 The change rate of demand on thermal power, wind power and photovoltaic under different scenarios in 2030 %

Table 9 The change rate of GDP under different scenarios %

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