Energy, economic, and environmental impacts of electricity market-oriented reform and the carbon emissions trading: A recursive dynamic CGE model in China

Abstract

Electricity market-oriented reform and carbon emissions trading, as the main policies implemented in China's power sector, have a profound impact on China's green and low-carbon transition by promoting resource allocation efficiency and internalizing external environmental costs, respectively. Therefore, this paper constructed a dynamic recursive CGE model to measure the energy, economic, and environmental impacts of carbon emissions trading and electricity market-oriented reform from electricity market structure and pricing mechanism. The results show that the two policies have a synergistic effect on industrial structure optimization, energy consumption structure optimization, and carbon emission reduction. Specifically, the share of value-added of the tertiary sector, the growth rate of coal consumption, the share of thermal power consumption, and carbon emissions in 2030 are reduced by 5.70 %, 18.29 %, 2.55 %, and 2.838 trillion tons, respectively, compared with the scenario without carbon emissions trading and electricity market-oriented reform. However, imperfectly competitive market structures outperform perfectly competitive market structures in energy consumption structure and carbon emission reduction. Electricity price regulation is also more beneficial to GDP growth and increase in residential disposable income compared to price liberalization. To this end, returning emission trading scheme revenues to residents can effectively mitigate the adverse impacts caused by market-oriented reforms.