Effects of scenario-based carbon pricing policies on China's dual climate change mitigation goals: Does policy design matter?

Although the carbon pricing policy is a critical driving factor that will help China achieve economic growth,energy transition,and dual climate change mitigation goals,the kind of carbon pricing policy that will complement the country's current development situation remains controversial.We apply the World Induced Technical Change Hybrid(WITCH)model to explore the heterogeneity and synergy of different carbon pricing policies,and the results indicate that it will be challenging to achieve carbon neutrality before 2060.The study find that the combined policy-a mix of carbon tax and carbon market policies--has the optimal emission reduction effect but comes with the highest economic cost,proving to be unsuitable in the long run.The carbon tax policy is an important transitional means to assist in emission reduction,which can serve as an important supplement to carbon market policy and be phased out after the market mechanism matures.

Collaborative robust dispatch of electricity and carbon under carbon allowance trading market

The launch of the carbon-allowance trading market has changed the cost structure of the power industry.There is an asynchronous coupling mechanism between the carbon-allowance-trading market and the day-ahead power-system dispatch.In this study,a data-driven model of the uncertainty in the annual carbon price was created.Subsequently,a collaborative,robust dispatch model was constructed considering the annual uncertainty of the carbon price and the daily uncertainty of renewable-energy generation.The model is solved using the column-and-constraint generation algorithm.An operation and cost model of a carbon-capture power plant(CCPP)that couples the carbon market and the economic operation of the power system is also established.The critical,profitable conditions for the economic operation of the CCPP were derived.Case studies demonstrated that the proposed low-carbon,robust dispatch model reduced carbon emissions by 2.67%compared with the traditional,economic,dispatch method.The total fuel cost of generation decreases with decreasing,conservative,carbon-price-uncertainty levels,while total carbon emissions continue to increase.When the carbon-quota coefficient decreases,the system dispatch tends to increase low-carbon unit output.This study can provide important guidance for carbon-market design and the low-carbon-dispatch selection strategies.

Factors affecting the pilot trading market of carbon emissions in China

Climate change and carbon emissions are major problems which are attracting worldwide attention. China has had its pilot carbon emission trading markets in seven regions for more than 3 years. What affects carbon emission trading market in China is a big question. More attention is paid to how China promotes the carbon emission trading schemes in the whole country. This paper addresses concerns about the functioning of carbon emission trading schemes in seven pilot regions and takes the weekly data from November 25, 2013, to March 19, 2017. We employ a vector autoregressive model to study how coal price, oil price and stock index have affected the carbon price in China. The results indicate that carbon price is mainly affected by its own historical price; coal price and stock index have negative effects on carbon price, while oil price has a negative effect on carbon price during the first 3 weeks and then has a positive effect on carbon price. More regulatory attention and economic measures are needed to improve market efficiency, and the mechanisms of carbon emission trading schemes should be improved.

Policy Implications for Carbon Trading Market Establishment in China in the 12th Five-Year Period

Based on the survey of international emissions trading system （ETS） and quantitative analysis, policy suggestions on establishing a carbon ETS in China are presented in this study. Sectors sensitive to carbon prices, e.g., the power generation sector and the iron and steel industry, are given priority to be covered by the ETS. Interregional carbon trading should be carried out as early as possible. The cap of the ETS should be based on China＇s carbon intensity reduction target with the floor carbon price for the market being set in the beginning. Suggestions on the infrastructure of ETS are also proposed, including the national wide carbon measuring, reporting, verification system building. account registration system and the legislation to national

Daily rolling estimation of carbon emission cost of coal-fired units considering long-cycle interactive operation simulation of carbon-electricity market

The high overlap of participants in the carbon emissions trading and electricity markets couples the operations of the two markets.The carbon emission cost(CEC)of coal-fired units becomes part of the power generation cost through market coupling.The accuracy of CEC calculation affects the clearing capacity of coal-fired units in the electric power market.Study of carbon–electricity market interaction and CEC calculations is still in its initial stages.This study analyzes the impact of carbon emissions trading and compliance on the operation of the electric power market and defines the cost transmission mode between the carbon emissions trading and electric power markets.A long-period interactive operation simulation mechanism for the carbon–electricity market is established,and operation and trading models of the carbon emissions trading market and electric power market are established.A daily rolling estimation method for the CEC of coal-fired units is proposed,along with the CEC per unit electric quantity of the coal-fired units.The feasibility and effectiveness of the proposed method are verified through an example simulation,and the factors influencing the CEC are analyzed.

Study on the investment value and investment opportunity of renewable energies under the carbon trading system

China has promised to start the national carbon trading system in 2017.In the carbon trading system,the renewable energy projects may obtain additional benefits through the Certified Carbon Emission Reduction(CCER) trade.As the carbon price fluctuates along with the market conditions,such fluctuation enables the renewable power projects to acquire the rights of an option,i.e.it may contain an even higher value due to the uncertainties in the future.While making an investment decision,the renewable power companies may choose to make the investment immediately,or postpone the investment and accumulate more information to increase the return of investment;and for immediate investments,the return must be sufficient to exceed the potential value of a waiting option.To study the investment in renewable power projects subject to the fluctuation of carbon price,this paper adopts the trinomial tree model of real options to estimate the net present value(NPV) and real option value(ROV) of three types of renewable power projects;according to the decision-making rules of real options to defer,all the three types of projects will exercise the option to postpone the investment decision.This thesis also calculates the benchmark prices of the three types of renewable projects at different times,in the two situations of having no government subsidy and having the government subsidy,so as to determine the investment opportunity of a project.The benchmark price decreases gradually along with the increase of government subsidy,indicating that the government subsidy will stimulate the investment in renewable projects.The benchmark price also increases gradually along with the lapse of time,indicating that the uncertainty will increase together with the time span and thus requires an even higher carbon price to determine the investment opportunity.This thesis also analyzes the sensitivity of factors affecting the investment in renewable projects and draws the conclusion that the fluctuation of carbon price is positively related with the benchmark price of renewable power projects,which indicates that the fluctuation of carbon price increases the option value of an investment but postpones the time of investment.As the China's carbon trading system improves gradually,the carbon price will reach a stable status,thus stimulate the power companies to invest in the renewable projects.

Optimal reduction and equilibrium carbon allowance price for the thermal power industry under China’s peak carbon emissions target

As the largest source of carbon emissions in China,the thermal power industry is the only emission-controlled industry in the first national carbon market compliance cycle.Its conversion to clean-energy generation technologies is also an important means of reducing CO_(2)emissions and achieving the carbon peak and carbon neutral commitments.This study used fractional Brownian motion to describe the energy-switching cost and constructed a stochastic optimization model on carbon allowance(CA)trading volume and emission-reduction strategy during compliance period with the Hurst exponent and volatility coefficient in the model estimated.We defined the optimal compliance cost of thermal power enterprises as the form of the unique solution of the Hamilton–Jacobi–Bellman equation by combining the dynamic optimization principle and the fractional It?’s formula.In this manner,we obtained the models for optimal emission reduction and equilibrium CA price.Our numerical analysis revealed that,within a compliance period of 2021–2030,the optimal reductions and desired equilibrium prices of CAs changed concurrently,with an increasing trend annually in different peak-year scenarios.Furthermore,sensitivity analysis revealed that the energy price indirectly affected the equilibrium CA price by influencing the Hurst exponent,the depreciation rate positively impacted the CA price,and increasing the initial CA reduced the optimal reduction and the CA price.Our findings can be used to develop optimal emission-reduction strategies for thermal power enterprises and carbon pricing in the carbon market.

Low Carbon Beijing:Research on the Influencing Factors of Carbon Emission Trading Price

The international community has taken extensive actions to achieve carbon neutrality and sustainable development with the intensification of global warming and climate change.China has also carried out a long-term layout,setting the goal of achieving a carbon peak by 2030 and carbon neutrality by 2060.In 2021,with the official launch of a unified national carbon emissions trading market,China’s nationwide carbon emissions trading kicked off.Carbon emission trading is an important policy tool for China’s carbon peak and carbon-neutral action and an essential part of the country’s promotion of a comprehensive green transformation of the economy and society.This study uses a VAR(Vector Autoregressive)model to analyze the influencing factors of the Beijing carbon emissions trading price from January 2014 to December 2019.The study found that coal prices have the most significant impact on Beijing’s carbon emissions trading prices.Oil prices,industrial development indexes,and AQI(Air Quality Index)impacted Beijing’s carbon emissions trading prices.In contrast,natural gas prices and economic indexes have the most negligible impact.These findings will help decision-makers determine a reasonable price for carbon emissions trading and contribute to the market’s healthy development.

Effect of Carbon Price Floor on Levelised Cost of Gas-Fired Generation Technology in the UK

The UK government implements carbon price floor to provide long-term incentive to invest in low-carbon technology, thus, fossil-fuel power plants have to face increasing carbon price. This report addresses the effect of carbon price floor on levelised cost of gas-fired generation technology through the levelised cost of electricity (LCOE) ap-proach with the estimation of carbon price floor. Finally, the comparison of levelised cost of electricity for all generation technology in the UK will be shown and discussed.

Modified Ramsey Rule and Optimal Carbon Tax

The Ramsey rule is regarded as a convenient vehicle for estimating the social discount rate in general. Carbon pricing is treated as another theory of environmental economics. This study clarifies the theoretical relationship between the Ramsey rule and optimal carbon price, which has been overlooked in the existing research. It succeeds in deriving the optimal carbon price from the modified Ramsey rule in stationary state. Since the Ramsey rule decides the dynamics of an economy and a stationary state is its destination, by using the optimization condition of individual who are assumed to live infinitesimally short life, we can solve the optimal carbon price at stationary state.

Could the EU carbon border adjustment mechanism promote climate mitigation?An economy-wide analysis

Due to concerns about carbon leakage and sectoral competitiveness,the European Union(EU)proposed implementing the carbon border adjustment mechanism(CBAM).The effectiveness and potential negative consequences of CBAM have aroused extensive discussion.From the perspective of the economy-wide analysis,this study uses a global computable general equilibrium model to explore the rationality of CBAM from the aspects of socioeconomic impact and the effects of promoting climate mitigation.Furthermore,the potential alternative mechanism of CBAM is proposed.The results show that CBAM can reduce the EU's gross domestic product(GDP)loss;however,the GDP loss in all other regions increases.Moreover,CBAM raises household welfare losses in most regions,including the EU.Second,although CBAM can reduce the marginal abatement cost in eight regions,it comes at the cost of greater economic losses.Furthermore,the economic and household welfare cost of raising emissions reduction targets in regions like the USA and Japan is substantially higher than the impact of passively accepting the CBAM;therefore,CBAM's ability to drive ambitious emission reduction initiatives may be limited.Finally,for the potential alternative mechanism,from the perspective of reducing economic cost and household welfare losses,the EU could implement domestic tax cuts in the short-term and promote global unified carbon pricing in the long-term.

Economic Implications of Avoiding Dangerous Climate Change： An Analysis Using the AIM/CGE [Global] Model

The purpose of this study is to analyze economic impacts of reducing greenhouse gases emissions significantly. A large amount of emissions reductions are required throughout this century to avoid dangerous climate change, and understanding the economic consequences under such situations is important and meaningful. The AIM/CGE [Global] model, a recursive dynamic computable general equilibrium model on a global scale, is applied to analyze carbon prices and changes in GDP when implementing five policy scenarios represented by emissions pathways, respectively. As a result of the analysis, higher carbon prices and larger decreases in GDP compared to the baseline emissions scenario are observed when emissions are reduced more deeply. However, such GDP losses are rather small and insignificant compared to the GDP growth observed throughout the century. These results suggest that although it is challenging to reduce emissions until the level to avoid dangerous climate change, there is a sufficient possibility to achieve it from economic perspectives.

Assessment of the carbon emissions reduction potential in Thailand’s power sector with high penetration of variable renewable energy sources and electric vehicles in the year 2030

The power sector has substantial carbon emissions reduction potential that could achieve the new nationally determined contribution target in 2030 by increasing low-carbon technologies,e.g.variable renewable energy sources and electric vehicles(EVs).Therefore,two approaches were suggested in this work.In the first approach,Thailand’s power sector was modelled by using PLEXOS software to find the impact of the high penetration of variable renewable energy(RE)and EV charging load for the projected year 2030.The second approach proposed a demand-response and energy storage system solution with carbon pricing in the model to assess the targets.As a result,the electricity demand from charging EVs will cause a new peak demand at night,while the high variable RE penetration will cause curtailment in the power system due to excess supply at noon.Therefore,Thailand’s power sector has the potential for carbon emissions reduction by 45%with clean energy technologies,which could increase to 68%with carbon pricing,easily achievable by the nationally determined contribution target in 2030.However,these benefits could only be derived if various entities involved in the energy regulatory,transport and power sectors coordinate to implement the required technological and financial policies.

An Empirical Investigation on the Risk-Return Relationship of Carbon Future Market

This paper examines the risk-return relationship for the carbon future market during Phases I, II and III of the European Union Emission Trading Scheme(EU ETS). The risk factors derived from the newly developed LSW model, are embedded into a GARCH framework. This new specification is compared with several GARCH-M type models analyzing the risk-return relationship in the carbon market. The results show that the new specification consistently achieves a good fit and possesses superior explanatory power for the European Union Allowance(EUA) data. Some policy suggestions regarding market efficiency are also provided.

Analysis of technology pathway of China's liquid fuel production with consideration of energy supply security and carbon price

Efforts to provide alternative resources and technologies for producing liquid fuel have recently been intensified.Different levels of dependence on oil imports and carbon prices have a significant impact on the composition of the cost-minimizing portfolio of technologies.Considering such factors,how should China plan its future liquid fuel industry?The model for supporting the technology portfolio and capacity configuration that minimizes the total system cost until 2045 is described in this study.The results obtained for different carbon prices and levels of dependence on oil import indicate that the oil-to-liquid fuel(OTL)will remain dominant in China's liquid fuel industry over the next three decades.If the carbon price is low,the coal-to-liquid fuel(CTL)process is competitive.For a high carbon price,the biomass-to-liquid fuel(BTL)technology expands more rapidly.The results also reveal that developing the BTL and CTL can effectively reduce the oil-import dependency;moreover,a high carbon price can lead to the CTL being replaced with the low-carbon technology(e.g.,BTL).Improvement in energy raw material conversion and application of CO_(2) removal technologies are also effective methods to control carbon emissions for achieving the carbon emission goals and ultimately emission reduction targets.

Influencing Factors and Prediction of Carbon Trading Market Prices in China via Elliptical Factor Analysis

In this paper,the authors take Hubei carbon trading market prices as a sample,and select 27 variables from five aspects:International carbon market prices,energy prices,the macroeconomic situation,exchange rate factors and climate environment.The authors construct the elliptical approximate factor model and use a robust two step method based on multivariate Kendall's Tau matrix to extract common factors,identify the influencing factors of carbon prices,make out-of-sample forecasting of carbon prices,and compare with the prediction based on the historical mean of carbon trading market prices.The results show that the prediction of carbon trading market prices using elliptical approximate factor model is more accurate than the prediction based on the historical mean of carbon trading market prices.Among them,fossil energy prices,international carbon prices and climate environment are important influencing factors of carbon trading prices.

Achievements and Challenges in European Energy Markets

The European electricity and gas markets have been deregulated more than two decades before.From rather diverse starting points,they have continuously evolved over the years to accommodate with new challenges and to improve integration.Since 2005,these markets have been complemented by the market for emission certificates established by the European Union(EU)emission trading system.Three partly competing paradigms have thereby shaped the markets and continue to drive their on-going transformation:effective competition,subsidiarity and sustainability.

EMISSION ABATEMENT FOR PRODUCTION SYSTEM ACROSS LOCATIONS WITH HETEROGENEOUS EMISSION PROFLES

This paper investigates a production system in which the desired system state is a reduction of emissions and the controlling action plan is altering carbon price. From the operations perspective, we develop a model to study how increasing carbon emission costs may affect the joint production and location decisions for a manufacturer across different locations. Specifically, our model incorporates economies of scale and explicitly links product demand, production costs and carbon emission levels to location decisions. The firm＇s decisions in production batch size and locations are then optimised. The system state of emission are analysed under different carbon prices. Finally we check the alignment of objectives in costs and emissions for the system. The results show that for a production system with economies of scale, the production allocation is transformed to a location choice problem after optimising the costs. Raising the carbon price reduces the carbon emissions but may not be able to induce the production to be placed in an emission efficient place. We propose a hybrid policy combining carbon price and free emission allowance to fully align the cost efficiency and emission efficiency and characterise the link between the emission target and the carbon price.

The first compliance cycle of China’s National Emissions Trading Scheme:insights and implications

China’s national Emissions Trading Scheme(ETS),the largest ETS in terms of the amount of CO_(2) regulated,was launched on the trading platform operated by the Shanghai Environment and Energy Exchange(SEEE)on July 16th 2021,and has successfully completed its first compliance cycle on December 30th,2021.During the operation of its first cycle,China’s national ETS differs from other international ETSs in many aspects,including trading products and participants,allowance allocation method,compliance term,and offset mechanism,leading to certain unique trading patterns.Some unique settings are worth noticing including key emitters dominated by state-owned enterprises(SOEs)who also dominate transactions,large-scale power groups’carbon strategies,allowances for 2 years of 2019 and 2020 being processed in one compliance period and allowed inter-year banking of allowances.All these have led to trading patterns characterized by cyclical demand-driven trading,insufficient trading capabilities of regulated entities,stable allowance price and an increased price of CCER.Nonetheless,the successful running of its first compliance cycle offers invaluable experience for future ETS development in operational mechanism improvement,sector coverage expansion,allocation optimization,and introduction of different types of market players and tradable products,and provides a good reference for future international expansion.