Jing Cao, Mun S. Ho, Rong Ma, and Fei Teng. 2021. “When carbon emission trading meets a regulated industry: Evidence from the electricity sector of China.” Journal for Public Economics, 200, August, Pp. 104470. Publisher's VersionAbstract
This paper provides retrospective firm-level evidence on the effectiveness of China’s carbon market pilots in reducing emissions in the electricity sector. We show that the carbon emission trading system (ETS) has no effect on changing coal efficiency of regulated coal- fired power plants. Although we find a significant reduction in coal consumption associated with ETS participation, this reduction was achieved by reducing electricity production. The output contraction in the treated plants is not due to their optimizing behavior but is likely driven by government decisions, because the impacts of emission permits on marginal costs are small relative to the controlled electricity prices and the reduction is associated with financial losses. In addition, we find no evidence of carbon leakage to other provinces, but a significant increase in the production of non-coal-fired power plants in the ETS regions. 
Hu Xian

Xian Hu

Ph.D. Student, School of Economics and Management, Tsinghua University
Visiting Fellow, Harvard-China Project
Xian’s current research focuses on carbon pricing policies and global economic development. She works on a dynamic model of the global economy and simulates... Read more about Xian Hu
Yu Zhang

Yu Zhang

Ph.D Student, School of Economics and Management, Tsinghua University
Visiting Fellow, Harvard-China Project
Yu's current research focuses on using economic approach to analyze relevant policies in the process of low-carbon transformation of the power industry.
Zhenyu Zhuo, Ershun Du, Ning Zhang, Chris Nielsen, Xi Lu, Jinyu Xiao, Jiawei Wu, and Chongqing Kang. 2022. “Cost increase in the electricity supply to achieve carbon neutrality in China.” Nature Communications, 13, June, Pp. 3172. Publisher's VersionAbstract
The Chinese government has set long-term carbon neutrality and renewable energy (RE) development goals for the power sector. Despite a precipitous decline in the costs of RE technologies, the external costs of renewable intermittency and the massive investments in new RE capacities would increase electricity costs. Here, we develop a power system expansion model to comprehensively evaluate changes in the electricity supply costs over a 30-year transition to carbon neutrality. RE supply curves, operating security constraints, and the characteristics of various generation units are modelled in detail to assess the cost variations accurately. According to our results, approximately 5.8 TW of wind and solar photovoltaic capacity would be required to achieve carbon neutrality in the power system by 2050. The electricity supply costs would increase by 9.6 CNY¢/kWh. The major cost shift would result from the substantial investments in RE capacities, flexible generation resources, and network expansion.