The impact on electric power industry under the implementation of national carbon trading market in China: A dynamic CGE analysis

Abstract

As the largest carbon emissions source sector, electric power industry is undoubtedly a principal part of the carbon trading market in China. Aimed at researching the impact on power industry beyond establishing the national carbon trading market, a dynamic computable general equilibrium (CGE) model embedded with carbon trading block is introduced in this paper. Subsequently, we design 8 scenarios of which illustrate corresponding industry carbon emissions baselines and free quotas ratios. The main simulation results are as follows. The implementation of carbon emissions trading would bring a certain negative impact on the overall economy. Real GDP will be reduced by about 0.08%–0.52% in 2030. Though low free quotas ratio will cause a relatively high loss of GDP, this negative impact would be eliminated in the long run. In addition, carbon emissions trading would also promote the clean production of electricity. Indeed, the electric power industry would reach carbon emissions peak around 2020. Relative to scenarios without carbon trading, carbon emissions would reduce more than 1000 million tons in 2030 when industry carbon emissions baseline declines at an annual rate of 2%. Consequently, the carbon market can achieve a more significant reduction in carbon emissions with the influencing of quotas fully auctioned scenario.