Enhancing China’s ETS for Carbon Neutrality: Focus on Power Sector

Enhancing China’s ETS for Carbon Neutrality: Focus on Power Sector

Executive Summary

The report focuses on enhancing China’s Emissions Trading System (ETS) to achieve carbon neutrality, with a particular emphasis on the power sector. Over the next few decades, China’s pace of reducing emissions will significantly influence global efforts to limit global warming to 1.5°C. The power sector plays a crucial role in meeting China’s goals of peaking CO2 emissions before 2030 and achieving carbon neutrality by 2060.

Policy Context

• Long-term Policy Objectives: The report outlines China’s long-term ambitions and strategies to reduce emissions and transition towards a low-carbon economy.
• China’s Power Sector: The power sector is central to achieving these goals due to its significant share of total emissions.
• China’s ETS Design: The existing ETS framework is described, highlighting its strengths and areas for improvement.
• China’s Renewables Policy: The report examines China’s renewable energy policies, specifically Renewable Portfolio Standards (RPS), which mandate a certain percentage of electricity generation from renewable sources.
• Interaction Between RPS and ETS: The report explores how the two systems interact and their combined effects on emissions, generation mix, and cost-effectiveness.

Key Features of the Model and Scenario Design

• Model Design: The report details the modeling approach used to simulate various scenarios.
• Scenario Design: Different scenarios are designed to test the impacts of enhanced ETS designs on emissions, generation mix, and cost-effectiveness.

Current Policy Mix - RPS and ETS

• Results of the RPS Scenario: The report presents the outcomes of implementing RPS alone.
• Results of the RPS-ETS Scenario: The combined effects of both RPS and ETS are analyzed, showing how they can complement each other.

Enhanced ETS Designs for Carbon Neutrality

• Impact on CO2 Emissions: The report evaluates the potential reduction in CO2 emissions under enhanced ETS designs.
• Impact on Generation Mix: The changes in the energy mix, particularly the shift towards renewable energy sources, are discussed.
• Policy Cost-effectiveness: The economic implications of enhanced ETS designs are analyzed, including cost savings and effectiveness.
• Impacts of CO2 Costs on Technologies: The report assesses how the cost of CO2 impacts various technologies and their adoption.
• Policy Interactions of ETS and RPS: The report explores the synergies and potential conflicts between ETS and RPS, suggesting ways to optimize their integration.

Acknowledgements, Contributors, and Credits

The report acknowledges the contributions of various individuals and organizations, including the International Energy Agency (IEA) and Tsinghua University’s Institute of Energy, Environment, and Economy (3E). It also thanks external experts and funders for their support and feedback.

Table of Contents

• Executive Summary
• Chapter 1: Policy Context
  • Long-term policy objectives
  • China’s power sector
  • China’s ETS design
  • China’s renewables policy
  • Interaction between and integration of RPS and ETS
• Chapter 2: Key Features of the Model and Scenario Design
  • Model design
  • Scenario design
• Chapter 3: The Current Policy Mix – RPS and ETS
  • Results of the RPS Scenario
  • Results of the RPS-ETS Scenario
• Chapter 4: Enhanced ETS Designs for Carbon Neutrality
  • Impact on CO2 emissions
  • Impact on generation mix
  • Policy cost-effectiveness
  • Impacts of CO2 costs on technologies
  • Policy interactions of ETS and RPS