Research on carbon trading mechanism of China at the background of achieving the NDC targets

doi:10.12006/j.issn.1673-1719.2020.069

Abstract

Abstract:

Under the background of achieving China’s targets of Nationally Determined Contributions (NDC), a recursive dynamic Computable General Equilibrium (CGE) model with distinguished disaggregation in the electric power sector was developed to simulate the implementation effects and economic impacts of different designs of carbon trading mechanism for the national carbon market. Results show that national carbon market can help China to achieve the NDC targets and reduce the negative impacts of carbon emission reduction on GDP growth. Comparing with the rule of grandfathering allocation based on carbon emission, allocating initial carbon allowance freely under the rule of benchmarking allocation based on carbon-intensity can decrease carbon price, increase the volume of trading allowance and enlarge the scale of the carbon market. Allocating initial carbon allowance by auctioning will cause larger mitigation cost for the industries covered by the carbon market but can increase government revenue. Levying carbon tax on industries and households not covered by the carbon market can control their carbon emission effectively, increase government revenue, reduce the carbon trading price and promote the achievement of China’s NDC targets. The national carbon market will restrain thermal power industry whereas promote the development of clean energy power generation industries to different extent.

Key words: National carbon market, Carbon trading mechanism, Carbon tax, Computable General Equilibrium (CGE) model, Nationally Determined Contributions (NDC)

XIAO Qian, PANG Jun, Xu Yun, CHEN Hui, Zeng Wen-Wan. Research on carbon trading mechanism of China at the background of achieving the NDC targets[J]. Climate Change Research, 2020, 16(5): 617-631.

Figures/Tables 13

Fig. 1 Nested structure of CES production function for non-electric power industries

Fig. 2 Nested structure of CES production function for electric power industries

Table 1 Levelized costs and generated power by technologies

Fig. 3 China’s GDP and its growth rate, consumption, electric power consumption structure and CO2 emissions under baseline

Table 2 Policy scenarios of carbon emission trading system in this study

Fig. 4 Total CO2 emission of China to achieve NDC targets under all policy scenarios

Table 3 Carbon price in different scenarios

Table 4 Free allowance by industry under different scenarios in 2030

Table 5 Trading allowance by industry under different scenarios in 2030

Table 6 Total trading allowance and the values in 2030 under different scenarios

Fig. 5 Impacts on GDP in 2030 under different policy scenarios

Table 7 Impacts on the output of electric power sectors in 2030 under all scenarios

Fig. 6 Impacts on the governmental income in 2030 under all scenarios

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