Carbon Price in China: A CO2 Abatement Cost of Wind Power Perspective

Boqiang Lin () and Yufang Chen

Emerging Markets Finance and Trade, 2018, vol. 54, issue 7, 1653-1671

Abstract: As a result of rapid development of industrialization and urbanization, energy (especially fossil fuels) demand growth is increasing. Hence, China is facing the huge pressure of environmental protection and CO2 emission reduction. The feed-in tariff (FIT) policy that promotes more wind power to substitute for thermal power and a well-functioning carbon price mechanism can significantly affect CO2 abatement, and both can work in coordination to achieve emission reduction. Using panel model, we prove that FIT policy is more effective than other policies in promoting more wind power. Also the slowdown of economic growth, energy substitution, technological progress, and CO2 mitigation requirement can stimulate the expansion of wind power. Additionally, based on the calculation of real abatement cost of wind power, we obtain the provincial and national average of carbon prices (239 CNY/ton and 242 CNY/ton). Specifically, 233-251 CNY/ton will be the range for reasonable carbon price in the future. We find that the carbon prices in this article are higher than those of the emissions trading scheme pilots in 2014 and 2015, due to the relatively high proportion of free allowance. Based on the above conclusions, we proposed some policy suggestions.

Date: 2018
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DOI: 10.1080/1540496X.2017.1386547

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