Economy-wide assessment of achieving carbon neutrality in China's power sector: A computable general equilibrium analysis

Abstract

The low-carbon transition in the power sector is essential for realising carbon peak and neutrality goals. However, there is a lack of research assessing the policy mix needed to achieve ambitious targets such as power sector's carbon neutrality. Therefore, using a computable general equilibrium model with a detailed power technology module, this study evaluates the macroeconomic and environmental impacts of four abatement approaches for achieving carbon neutrality in China's power sector. Results show that, first, subsidising renewable electricity combined with carbon pricing is a relatively optimal means of achieving power sector's carbon neutrality, with the lowest carbon price and the least loss to the macroeconomy and household welfare. Moreover, it will increase the renewable energy proportion most strongly, also exerting the superior co-benefits on pollutants. Second, subsidising CCS combined with carbon pricing is the least advantageous mean. It causes the largest loss of both GDP and household welfare, and the promotion effects of renewable energy and co-benefits are relatively weak. Third, considering the carbon neutrality goal in China's power sector, if subsidised renewable electricity and carbon pricing are adopted, the targeted measures for pollutants could be significantly relaxed, whereas combined CCS subsidies and carbon pricing can moderately weak measures intensity for pollutant.