Understanding the economic impact of interacting carbon pricing and renewable energy policy in China
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ORIGINAL ARTICLE
Understanding the economic impact of interacting carbon pricing and renewable energy policy in China Jie Wu 1 & Ying Fan 2
&
Govinda Timilsina 3 & Yan Xia 4,5 & Renyong Guo 2
Received: 11 May 2019 / Accepted: 20 May 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Climate change is posing risks for human and natural systems, and one of the most important questions faced by policy makers is to reduce such risks and impacts through adaption and mitigation actions. As the country with the highest CO2 emissions, China is facing unprecedented challenges: climate change, energy structure transformation and socio-economic development all pose complex dilemmas for policy makers. The Chinese government has introduced energy policy and emission reduction measures to achieve its climate change mitigation targets. However, overlap between these measures may generate great uncertainty about their performance. By using a multi-regional computable general equilibrium (CGE) model, this study examines the economic impacts of implementing a nationwide carbon market and a renewable energy subsidy in the power sector in China. The study finds that a renewable energy policy would increase the economic cost of reducing greenhouse gas emissions and lead to a lower carbon price level if a carbon pricing mechanism were in place. However, the combination of the two policies indeed shows advantages in achieving emission reduction targets and renewable energy promotion targets. While an emission trading scheme is necessary for reducing emissions effectively, a renewable energy policy could promote the large-scale use of renewable energy in the electricity sector. In addition, the adoption of a renewable energy policy could yield substantial inter-regional capital inflow to central and western regions. This would improve low-carbon investment in less developed regions, and thus an appropriately designed policy mix would be sensible. Keywords Climate change . China . Computable general equilibrium (CGE) model . Emission trading . Renewable energy subsidy
This article is part of the Topical Collection on Mitigation and adaptation strategies under uncertainties in East Asia Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10113-020-01663-0) contains supplementary material, which is available to authorized users. * Ying Fan [email protected] Jie Wu [email protected] Govinda Timilsina [email protected]
1
School of Statistics and Management, Shanghai University of Finance and Economics, Shanghai 200433, China
2
School of Economics and Management, Beihang University, Beijing 100191, China
3
Research Department, World Bank, Washington, DC, USA
4
Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
5
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China
Yan Xia [email protected] Renyong Guo [email protected]
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