THE FUTURE OF NATURAL GAS IN CHINA: EFFECTS OF PRICING REFORM AND CLIMATE POLICY

Danwei Zhang and Sergey Paltsev ()
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Danwei Zhang: MIT Joint Program on the Science and Policy of Global Change, Massachusetts Institute of Technology, Cambridge, MA, USA
Sergey Paltsev: MIT Joint Program on the Science and Policy of Global Change, Massachusetts Institute of Technology, Cambridge, MA, USA

Climate Change Economics (CCE), 2016, vol. 07, issue 04, 1-32

Abstract: China is currently attempting to reduce greenhouse gas emissions and increase natural gas consumption as a part of broader national strategies to reduce the air pollution impacts of the nation’s energy system. To assess the scenarios of natural gas development up to 2050, we employ a global energy-economic model — the MIT Economic Projection and Policy Analysis (EPPA) model. The results show that a cap-and-trade policy will enable China to achieve its climate mitigation goals, but will also reduce natural gas consumption. An integrated policy that uses a part of the carbon revenue obtained from the cap-and-trade system to subsidize natural gas use promotes natural gas consumption, resulting in a further reduction in coal use relative to the cap-and-trade policy case. The integrated policy has a very moderate welfare cost; however, it reduces air pollution and allows China to achieve both the climate objective and the natural gas promotion objective.

Keywords: Natural gas; China; climate policy; pricing reform; economic modeling (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2010007816500123

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