Coupling effects of consumption side renewable portfolio standards and carbon emission trading scheme on China's power sector: A system dynamic analysis

Abstract

To fulfill the goals of sustainable development and emission reduction, China has established the consumption side renewable portfolio standards (RPS) and domestic nationwide carbon emission trading (CET) scheme. However, there are intricate interrelationships between the two mechanisms as they overlap in policy goals and implementation measures, which might lead to policy synergy or policy ineffectiveness. Therefore, investigating the coupling effects in the context of policy coexistence is imperative for policy optimization and realization of the policy objectives. In this study, a simulation model cooperating the electricity market, the excess consumption trading market, the tradeable green certificates (TGC) market and the CET market, based on the system dynamics (SD) methodology is proposed. The paper comprehensively investigated the complex relationship between the four markets and conducted experiments with different scenario settings in RPS quota goal and carbon quota goal. The results illustrate that: (1) Both mechanisms can facilitate the expansion of renewable electricity and improve the power supply structure. (2) The quota goals of the two policies should be reasonably set as they contain both the abovementioned overlapping effects, as well as conflicts in the effects on the total electricity supply and electricity price. (3) The consumption side RPS is conductive for market absorption of renewable electricity with a proper higher RPS quota goal. (4) The TGC market is oversupplied, and the price keep decreasing under the consumption side RPS, more demand incentive mechanisms are required for TGC market.