The Interplay Between China’s Regulated and Voluntary Carbon Markets and Its Influence on Renewable Energy Development—A Literature Review

Florentina Paraschiv (), Hannah Schmid, Marten Schmitz, Vivian Dünwald and Emma Groos
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Florentina Paraschiv: Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
Hannah Schmid: Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
Marten Schmitz: Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
Vivian Dünwald: Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany
Emma Groos: Chair of Finance, Zeppelin University, Am Seemooser Horn 20, 88045 Friedrichshafen, Germany

Energies, 2024, vol. 17, issue 22, 1-23

Abstract: This is the first review study that focuses on the interplay between China’s regulated and voluntary carbon markets, the Emissions Trading System (ETS), the China Certified Emission Reduction (CCER) scheme, and their combined influence on the development of renewable energy in the country. Through a comparative literature review of 52 peer-reviewed academic papers published between 2009 and 2024, this study aims to elucidate how these market mechanisms interact to drive renewable energy deployment. The findings indicate that both the ETS and the CCER system positively affect China’s renewable energy landscape. The ETS, with its Cap-and-Trade (CaT) mechanism, sets a cap on total emissions and allows for the trading of emission quotas, thereby creating financial incentives for companies to reduce emissions and invest in renewable energy. The CCER scheme complements the ETS by allowing companies to use the CCER scheme for a capped share of their ETS certificates, whereby the lower CCER price diverts investments to where the saved ton of CO 2 in China is cheapest, further incentivizing investments in renewable energy. This dual mechanism allows for a more flexible and cost-effective approach to achieving emission reduction targets, thereby fostering an environment conducive to investment in renewable energy. It will stimulate additional investment in renewable energy projects in the long run, particularly in economically underdeveloped regions, contributing to both local economic development and national emission reduction targets.

Keywords: China emission trading system (ETS); voluntary carbon markets (CCER); renewable energy development; cap-and-trade mechanism; carbon market dynamics (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: 2024
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