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GTAP Resource #4726

"Application of SICGE (A GEMPACK-based CGE in China):Developing China’s National Carbon Market in Coordination with the Electricity"
by Li, Jifeng, Cai Songfeng and Yaxiong Zhang

The operation of seven carbon emissions trading pilots since 2013 has contributed significantly to development of China’s carbon market during the 12th Five Year Plan period and paved the way of building a national emissions trading scheme in the future.
Chinese studies on carbon markets have been focusing on the design of emissions trading policy itself, drawing lessons from the international experience and domestic pilot schemes. What’s not been discussed extensively when designing the top-level climate policies is the market conditions, for example the impact of energy price control on emissions reductions. It is particularly important in China when the reform of the energy market is lagging behind the development of carbon market.
In the paper, we carried out the quantitative analysis based on a GEMPACK-based Computable General Equilibrium Model in China—SICGE
The study results show that in the absence of the necessary response measures, price control in general will lead to 18%-32% decline of operating efficiency of the carbon market, because the carbon costs are not well reflected in the electricity price. In order to reduce the negative impacts, policy makers need to improve the design of carbon market in the following three areas:
1. The power companies need to receive free allowances to offset the negative influence by electricity price control, but the free allowance need to be phased out over time;
2. It is recommended that electricity price is allowed to increase in certain industrial sectors and gradually expand to other sectors to discover the potential of saving on the demand side;
3. Ensure the consistency of the above two measures, and jointly develop the carbon market and electricity market.

Resource Details (Export Citation) GTAP Keywords
Category: 2015 Conference Paper
Status: Published
By/In: Presented at the 18th Annual Conference on Global Economic Analysis, Melbourne, Australia
Date: 2015
Created: Li, J. (4/15/2015)
Updated: Li, J. (4/15/2015)
Visits: 2,778
- Dynamic modeling
- Climate change policy
- Asia (East)

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