Three computable general equilibrium models are used to estimate the economic implications of a stylized version of EU climate policy. If implemented at the lowest possible cost, the 20% emissions reduction would lead to a welfare loss of 0.5-2.0% by 2020. Second-best policies increase costs. A policy with two carbon prices (one for the ETS, one for the non-ETS) could increase costs by up to 50%. A policy with 28 carbon prices (one for the ETS, one each for each Member State) could increase costs by another 40%. The renewables standard could raise the costs of emissions reduction by 90%. Overall, the inefficiencies in policy lead to a cost that is 100-125% too high. The models differ greatly in the detail of their results. The ETS/non-ETS split may have a negligible impact on welfare, while the renewables standard may even improve welfare. The models agree, however, that the distortions introduced by total EU package imply a substantial welfare loss over and above the costs needed to meet the climate target. The marginal, total and excess costs reported here are notably higher than those in the impact assessment of the European Commission.

THE EU 20/20/2020 TARGETS: AN OVERVIEW OF THE EMF22 ASSESSMENT. ESRI WP325. October 2009

Could carbon emission control firms achieve an effective financing in the carbon market? A case study of China's emission trading scheme

This paper analyzes the economic impacts of a national emissions trading scheme in 31 Chinese provinces. The emissions trading system is assumed to accomplish China's emissions reduction targets set under the Paris Climate Agreement. A multi-regional, multi-sectoral, recursive-dynamic computable general equilibrium model is developed for the analysis. The results show that the emissions trading scheme would reduce provincial CO2 emissions by 4%–22% relative to the baseline levels in 2030. It would cause the provincial GDP to change from −4.6% to 1.8% relative to the 2030 baseline levels. The magnitudes of the impacts on provincial economies and CO2 emissions are sensitive to initial emissions allocation rules. Some provinces that face GDP loss under one rule of emissions allocation would experience GDP gains under the other rules, and vice versa. However, emissions-intensive provincial economies—Neimenggu, Ningxia, Shanxi, and Shaanxi—are found to experience higher GDP loss irrespective of the allowance allocation rules. Meanwhile, Fujian, Guangdong, Guangxi, and Liaoning are found to experience higher GDP under all the rules of allowances allocation.

How would an emissions trading scheme affect provincial economies in China: Insights from a computable general equilibrium model

Promoting industrial structure advancement through an emission trading scheme: Lessons from China’s pilot practice

China's unconventional carbon emissions trading market: The impact of a rate-based cap in the power generation sector

Climate change is posing risks for human and natural systems, and one of the most important questions faced by policy makers is to reduce such risks and impacts through adaption and mitigation actions. As the country with the highest CO2 emissions, China is facing unprecedented challenges: climate change, energy structure transformation and socio-economic development all pose complex dilemmas for policy makers. The Chinese government has introduced energy policy and emission reduction measures to achieve its climate change mitigation targets. However, overlap between these measures may generate great uncertainty about their performance. By using a multi-regional computable general equilibrium (CGE) model, this study examines the economic impacts of implementing a nationwide carbon market and a renewable energy subsidy in the power sector in China. The study finds that a renewable energy policy would increase the economic cost of reducing greenhouse gas emissions and lead to a lower carbon price level if a carbon pricing mechanism were in place. However, the combination of the two policies indeed shows advantages in achieving emission reduction targets and renewable energy promotion targets. While an emission trading scheme is necessary for reducing emissions effectively, a renewable energy policy could promote the large-scale use of renewable energy in the electricity sector. In addition, the adoption of a renewable energy policy could yield substantial inter-regional capital inflow to central and western regions. This would improve low-carbon investment in less developed regions, and thus an appropriately designed policy mix would be sensible.

Renyong Guo

Papers

Understanding the economic impact of interacting carbon pricing and renewable energy policy in China

A robust strategy to address the airport gate assignment problem considering operators' preferences