Grappling with the trade-offs of carbon emission trading and green certificate: Achieving carbon neutrality in China

Haoran Wang; Tiantian Feng; Jiajie Kong; Mingli Cui; Ming Xu

doi:10.1016/j.jenvman.2024.121101

Grappling with the trade-offs of carbon emission trading and green certificate: Achieving carbon neutrality in China

J Environ Manage. 2024 May 17:360:121101. doi: 10.1016/j.jenvman.2024.121101. Online ahead of print.

Authors

Haoran Wang¹, Tiantian Feng², Jiajie Kong¹, Mingli Cui¹, Ming Xu³

Affiliations

¹ School of Economics and Management, China University of Geosciences, Beijing, 100083, China.
² School of Economics and Management, China University of Geosciences, Beijing, 100083, China; Key Laboratory of Carrying Capacity Assessment for Resource and Environment, Ministry of Land and Resources, Beijing, 100083, China. Electronic address: fengtiantian89@163.com.
³ School of Environment, Tsinghua University, Beijing, 100084, China.

PMID: 38761619
DOI: 10.1016/j.jenvman.2024.121101

Abstract

Although our knowledge of national carbon emission trading system and green certificate trading system are powerful incentive instruments that can deliver on increasingly ambitious climate targets in China, there remains an uncertainty of systems' structural reforms. This study builds on and extends a well-established dynamic computable general equilibrium (CGE) model to incorporate carbon trading system and green certificate trading system into the modeling framework, simulating a diverse of system development pathways further allows an exploration of the many possible policy effect. Then, using total factor productivity as a comprehensive indicator to asses policy effectiveness, the evolutionary trend of comprehensive effects under different paths are separately evaluated to discover the reforms' optimal range. Our work offers main results: First, these instruments provide a price signal. The introduction of a carbon allowance auction drive up carbon prices, while the implementation of a green certificate punishment and the expansion of the trading scope promote an increase in green certificate prices. Second, all policy scenarios that help reduce carbon emission intensity and optimize the power supply structure. However, in achieving the net-zero goal, the green certificate policy incurs more economic costs than the carbon trading policy. Indeed, the combination of multiple policy tools alleviates the decline of social welfare levels. Third, synergism design among policy tools: the focus should be on carbon trading policy from 2021 to 2030, green certificate trading policy from 2030 to 2050, and strengthened policy from 2050 to 2060. Reform measures within policies may need to be introduced in a timely manner. This study offers specific insights and tailored policy proposals to support policymakers in balancing environmental goals with economic and social needs in light of the aforementioned findings.

Keywords: Electricity market; Green certificate trading mechanism; National carbon emission trading scheme; Net-zero carbon emissions; Policies synergy.