The Impact of Carbon Emission Trading on Renewable Energy: A Comparative Analysis Based on the CGE Model

Shenhai Huang, Chao Du, Xian Jin, Daini Zhang, Shiyan Wen () and Zhijie Jia
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Shenhai Huang: Jiaxing Hengchuang Electric Power Design & Institute Co., Ltd., Jiaxing 314100, China
Chao Du: Jiaxing Hengchuang Electric Power Design & Institute Co., Ltd., Jiaxing 314100, China
Xian Jin: Jiaxing Hengchuang Electric Power Design & Institute Co., Ltd., Jiaxing 314100, China
Daini Zhang: Jiaxing Hengchuang Electric Power Design & Institute Co., Ltd., Jiaxing 314100, China
Shiyan Wen: School of Economics, Xi’an University of Finance and Economics, Xi’an 710003, China

Sustainability, 2023, vol. 15, issue 16, 1-16

Abstract: This study examines the effects of carbon emission trading on renewable energy consumption in China. The research applies the CEEEA2.0 model to simulate the economic, energy, and environmental impacts of carbon trading from 2018 to 2030. The CEEEA2.0 model is a recursive dynamic computable general equilibrium model that incorporates multiple households, sectors, and an energy and environment module. Four scenarios are considered: the Business as Usual (BaU) scenario, the Emission Trading Scheme (ETS)-benchmark scenario, and the ETS-strengthened and ETS-enhanced scenarios. The findings reveal that carbon emission trading positively influences electricity consumption, resulting in a higher preference for renewable energy due to reduced price disparities between renewable sources and fossil fuels. Consequently, electricity generation from renewable sources increases in all scenarios compared to the BaU scenario. However, the share of renewable energy is not substantially affected by carbon emission trading due to the complex interplay of factors, including substitution and income effects. The study further highlights that carbon trading significantly reduces coal usage and partially increases the overall proportion of renewable energy. These results underscore the significance of establishing ambitious carbon reduction targets and continual efforts to shift towards clean energy sources.

Keywords: emission trading scheme; renewable energy; dynamic Computable General Equilibrium (CGE) model; CEEEEA2.0 model; energy, environmental and economic impact; power generation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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