Optimizing the Chinese Electricity Mix for CO2 Emission Reduction: An Input-Output Linear Programming Model with Endogenous Capital.

Abstract

This study develops an input-output linear programming (IO-LP) model to identify a cost-effective strategy to reduce the economy-wide carbon dioxide (CO2) emissions in China from 2020 to 2050 through a shift in the electricity generation mix. In particular, the fixed capital formation of electricity technologies (FCFE) is endogenized so that the capital-related CO2 emissions of various generation technologies can be captured in the model. The modeling results show that low-carbon electricity, e.g., hydro, nuclear, wind, and solar, is associated with lower operation-related CO2 emissions but higher capital-related CO2 emissions compared to coal-fired electricity. A scenario analysis further reveals that a shift in the electricity generation mix could reduce the accumulated economy-wide CO2 emissions in China by 20% compared to the business-as-usual (BAU) level and could help peak China's CO2 emissions by 2030. The emission reduction is mainly due to a drop in operation-related CO2 emissions of electricity, contributing to a decrease in accumulated economy-wide emissions by 21.4%. The infrastructure expansion of electricity, on the other hand, causes a rise in the accumulated emissions by 1.4%. The proposed model serves as an effective tool to identify the optimal technology choice in the electricity system with the consideration of both direct and indirect CO2 emissions in the economy.