Will the tradable green certifications and renewable portfolio standard policy work well in China: A recursive CGE analysis

Abstract

Massive carbon emissions and environmental pollution from electric power industries make China accelerate the promotion of renewable energy power. Since then, Tradable Green Certifications (TGCs) and Renewable Portfolio Standard (RPS) systems have been adopted as a main energy policy to deepen the current power sector reform. A recursive computable general equilibrium model will be constructed to explore the impacts of TGC and RPS policies under 4 scenarios. The simulation results show that the implementation of TGC and RPS policies will reduce 1.12 Bt-CO2 emissions and 1040.31 Mtce energy consumptions at most in 2030. Moreover, the TGC and RPS policies will help to rebuild a sustainable economic structure by the limitation of fossil energy consumption and output; especially in coal and oil industries, the spread of TGC and RPS makes renewable energy electricity become fungible for other energy generation. Nevertheless, this policy will also cause a lot of economic loss in gross domestic product through the huge deterioration of fossil energy-related industries, which will be expressed in the dramatic decline of output, consumption, and import and export trade. Additionally, we discover that the RPS level will have a significant influence on TGC prices: the higher the RPS level, the more the expensive TGC price. Overall speaking, the RPS level of 30% would be a better choice for the balance between the development of renewable energy and the negative impact on macroeconomics. It is recommended that the implementation of the TGC and RPS level should be with other economic policies to reduce the negative effects.