Reforming the Power Sector: How Electricity Sector Reforms Will Impact China’s National Emissions Trading Scheme

reforming power

Author:  Josh Harmon | Xieyao Chen | Michelle Ker | Matthew Nitkoski

Organization:  The George Washington University Elliott School of International Affairs

Report Date: 2016

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Summary: 

This report analyzes how China's national carbon emissions trading scheme (ETS) will interact with its power sector. It covers the seven ETS pilots, ETS and power sector stakeholders, electricity pricing, and China's unique dispatch model. 

Key Take-Aways: 

  • ETS stakeholders and power sector stakeholders are different; they have overlapping responsibilities but often divergent interests
  • The ETS pilots have been successful at building capacity, but significant challenges issues lie ahead regarding permit allocations, data reliability, and the impact of complementary policies that could undercut the ETS's effectiveness
  • Short term pricing recommendation: cover indirect emissions
  • Long term pricing recommendation: China should transition towards a competitive electricity market to allow a carbon price to pass through to end users
  • China should adopt two-part pricing to avoid stranded asset issues with current generation and expand balancing areas to solve the challenge of equal shares dispatch

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