The unintended impact of carbon trading of China's power sector

Hui Zhang and Bing Zhang

Energy Policy, 2020, vol. 147, issue C

Abstract: Carbon trading is considered a strategy for reallocating carbon permits and reducing abatement costs that may also change energy consumption and the distribution of atmospheric pollution emissions, resulting in environmental health benefits or damage on a regional scale. In this research, we use an agent-based model to construct a national carbon emissions trading market of the power sector based on the year of 2013, and simulate the key atmospheric pollution emission patterns and the corresponding environmental health effects. We find that compared with a command and control policy, the carbon trading policy is able to reduce the CO2 emissions and save abatement costs by approximately 63.53 RMB/ton. Meanwhile, the results show the carbon trading policy would synergistically reduce PM2.5 emissions by 1.55 million tons. Addition, we use a simplified exposure-response model to estimate health benefits by synergistically reducing PM2.5 emissions, and find that the carbon trading policy would decrease 45,200 cases of all-cause mortality and generate 307.07 billion RMB in environmental health benefits. The co-benefit accounts for 0.52% of the nation's gross domestic product (GDP) in 2013. However, compared with the command and control policy, carbon trading changes the pollution emission distribution among the different provinces, and results in unintended environmental health damages in some provinces. Setting reasonable trading directions and exchange ratios, increasing stringency of environmental regulations in some provinces with worsening air pollution should be implemented to complement the carbon trading policy.

Keywords: Carbon emission trading; Co-benefits; Agent-based model; Policy design (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:147:y:2020:i:c:s0301421520305929

DOI: 10.1016/j.enpol.2020.111876

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