The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment |
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| Affiliation: | 1. Center for Energy and Environmental Policy Research, Institute of Policy and Management, Chinese Academy of Sciences, Beijing 100190, China;2. Institute for Sustainable Resources (ISR), University College London, United Kingdom;3. School of Economics & Management, Beihang University, Beijing 100191, China;1. Department of Finance, South University of Science and Technology of China, Shenzhen, China;2. Research Center on Modern Logistics, Graduate School at Shenzhen, Tsinghua University, Shenzhen, China;3. School of Civil and Environment Engineering, Harbin Institute of Technology Shenzhen Graduate School, Shenzhen, China;4. Energy Analysis and Environmental Impacts Division, Lawrence Berkeley National Laboratory, Berkeley, CA 94720, USA;5. Department of Energy Economics, School of Economics, Renmin University of China, Beijing 100872, China;1. School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China;2. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China;1. Design Center in the State Grid Sichuan Economic Research Institute (Chengdu Chengdian Electric Power Engineering Design Co., Ltd), Chengdu 610000, Sichuan, PR China;2. School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian 361005, PR China;1. School of Management and Economics, Beijing Institute of Technology, Beijing 100081, PR China;2. Business School of Hunan University, Changsha 410082, PR China;3. Center for Resource and Environmental Management, Hunan University, Changsha 410082, PR China;4. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, PR China;5. Hologic Corporation, 2585 Augustine Dr, Santa Clara, CA 95054, USA;1. Institute of Energy Environment and Economy, Tsinghua University, Beijing, 100084, People’s Republic of China;2. Research Center for Contemporary Management, Tsinghua University, Beijing, 100084, People’s Republic of China;3. School of Public Policy and Management, Tsinghua University, Beijing, 100084, People’s Republic of China;4. Chinese Academy of Environment Planning, Beijing, 100000, People’s Republic of China |
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| Abstract: | China is planning to introduce emission trading scheme (ETS) to decrease CO2 emission. As low carbon energy (LCE) will play a pivotal role in reducing CO2 emissions, our paper is to assess the extent and the conditions under which a carbon ETS can deliver LCE investment in China. We chose wind technology as a case study and a real-option based model was built to explore the impact of a number of variables and design features on investment decisions, e.g. carbon and electricity price, carbon market risk, carbon price floor and ceiling and on-grid ratio. We compute critical values of these variables and features and explore trade-offs among them. According to our work, a carbon ETS has a significant effect on wind power plant investment although it cannot support investment in wind power on its own. Carbon price stabilization mechanisms such as carbon price floor can significantly improve the effect of carbon ETS but the critical floor to support investment is still much higher than the carbon price in China pilot ETSs. Our results show that other policy measures will be needed to promote low-carbon energy development in China. |
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| Keywords: | Emission trading scheme (ETS) Low carbon energy (LCE) investment Wind power China Real option |
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