Assessing the effects of emissions trading systems on energy consumption and energy mix

Xiujie Tan, Qian Sun, Meiji Wang, Tsun Se Cheong, Wai Yan Shum and Jinpeng Huang

Applied Energy, 2022, vol. 310, issue C, No S0306261922000642

Abstract: The carbon emissions trading system (ETS) is expected to achieve energy transition and carbon-neutrality goals by theoretically reducing energy consumption and adjusting the energy mix. This study aims to provide firm-level evidence on these effects by adopting the distribution dynamics approach, which could reveal historical transition probabilities and predict long-term evolutions. By using the unique dataset from the Hubei ETS pilot in China, this study can serve as an example for promoting ETS. The results indicate that: (1) Most firms converge to a lower relative energy consumption under ETS, resulting in reduced total energy consumption. However, it would take a long time to achieve energy transition. (2) The primary peak of the relative coal consumption distribution reduces from 0.07 to 0.02 under ETS, implying a decline in coal use. Meanwhile, the share of electricity consumption increases, indicating a switch from coal to electricity. (3) ETS would place a limit on fossil energy, and an even stricter limit on coal for firms with high energy consumption. (4) Both the total and share of energy-induced carbon emissions also decrease, implying that ETS might realize the decoupling of economic growth from fossil energy and carbon emissions.

Keywords: Emissions trading system; Carbon neutrality; Energy consumption; Energy mix; Distribution dynamics analysis (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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DOI: 10.1016/j.apenergy.2022.118583

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