Study on the impact of emission trading scheme on technological progress of power generation sector in China: A perspective from energy transition

Kege Sun, Fengqi Zhou and Xinyu Liu

Energy, 2024, vol. 302, issue C

Abstract: Green energy transition from fossil fuels to wind and solar is inevitably driven by environmental and climate policy. How the emission trading scheme (ETS) influences energy transition in China deserves to be analyzed in the context of carbon neutrality. This study analyzes the impact of ETS on neutral and biased technological progress of China's power generation sector by decomposing the power sector by generation technology in a translog cost function. It then analyzes how the ETS pilot policy brings about biased technological progress between different generation technologies using difference-in-differences and synthetic control methods. The results show that ETS pilot policy contributes to green energy transition by bringing about neutral technological progress of China's power generation sector, utilization rate decrease of thermal power capacity and stimulating generation units' upgradation of the thermal power sector. Although China's energy transition is remarked by substitution of thermal power sector with variable renewable energy sector, there is no evidence that ETS pilot policy has contributed to this trend. However, it inhibits innovation of variable renewable energy in pilot regions. It is necessary for the government to take measures to strengthen ETS policies' impact on energy transition through supporting innovation and expansion of the VRE sector.

Keywords: Emission trading scheme; Green energy transition; Technological progress; Seemingly unrelated regression (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:302:y:2024:i:c:s0360544224015238

DOI: 10.1016/j.energy.2024.131750

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