Has carbon emissions trading system promoted non-fossil energy development in China?. (15th November 2021)

• Record Type: Journal Article
• Authors: Liu, Jing-Yue; Zhang, Yue-Jun
• Is Part Of: Applied energy. Volume 302(2021)
• Publication Date: 2021-11-15
• Subjects: Carbon emissions trading -- Non-fossil energy -- Renewable energy -- China; Power (Mechanics) -- Periodicals; Energy conservation -- Periodicals; Energy conversion -- Periodicals; 621.042
• DOI: 10.1016/j.apenergy.2021.117613
• Languages: English
• ISSNs: 0306-2619

Abstract

Highlights: It evaluates the effect of China's ETS on non-fossil energy development. It analyzes ETS's effects from energy type, pilot, and pilot-energy type aspects. The ETS has the most significant promoting effect on hydropower and photovoltaics. Carbon price plays a positive role in moderating the effect of China's ETS. Abstract: Emissions Trading Scheme (ETS) can internalize the environmental costs of fossil energy consumption and encourage enterprises to consume non-fossil energy, which is crucial for People's Republic of China (PRC) to achieve the contribution target of the Paris Agreement cost-effectively. However, whether the ETS in PRC can promote non-fossil energy development remains to be answered. This paper uses a difference-in-differences model to evaluate the effect of the ETS on non-fossil energy development in PRC. Using provincial monthly panel data from January 2004 to December 2019, we find that (1) the ETS has significantly promoted non-fossil energy development in PRC, increasing the monthly average share of non-fossil energy power generation in total power generation by 2.326 percentage points, which has been verified by a series of robustness tests. (2) The effect of the ETS on non-fossil energy development is heterogeneous by energy type, pilot region, and pilot-energy type. The ETS has significantly increased the share of hydropower and photovoltaic power generation, and has significantly promoted non-fossil energy development in Guangdong; meanwhile, the ETS has significantly increased the share of hydropower and nuclear power in Guangdong, and the share of wind power and photovoltaic power in Hubei. (3) The higher the carbon price, the greater the role of the ETS in promoting non fossil energy development.