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On the Effectiveness of the Abatement Policy Mix: A Case Study of China’s Energy-Intensive Sectors

Xin Liu (), Yuan Li (), Dayong Zhang () and Lei Zhu ()
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Xin Liu: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
Yuan Li: Economics and Development Research Institute, SINOPEC, Beijing 100029, China
Lei Zhu: School of Economics and Management, Beihang University, Beijing 100191, China

Energies, 2018, vol. 11, issue 3, 1-31

Abstract: To achieve carbon emissions control targets, policymakers often need a basket of policies to account for the complexity of abatement. The instruments in the policy mix are often interconnected. It is of great importance to study how different abatement policies perform in practice—in other words, to evaluate the effectiveness of the abatement policy mix. This paper builds a multisector partial equilibrium model and then studies the policy effectiveness using data from two energy-intensive sectors in China, namely, the iron and steel sector and the cement sector. The results show clear evidence that these policies interact, and the policy mix is not a simple aggregation but rather differs across sectors, which leads to fundamentally different scenarios in terms of energy savings, emissions reductions and production behaviors. Energy-savings subsidies can increase production and profit with a lower equilibrium level of carbon prices, whereas output-based rebating of allowances reduces production and is associated with higher carbon prices.

Keywords: abatement policy mix; emissions trading; energy-intensive sectors; output-based rebates; subsidies (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2018
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