Carbon Pricing and Renewable Energy in China
Coordinating carbon pricing policy and renewable energy policy with a case study in China
The Issue:
The issue at hand is the interaction between carbon pricing and renewable energy subsidies, which can lead to unintended conflicts, such as the collapse of CO2 prices. In China’s case, renewable subsidies could reduce demand for carbon permits, destabilizing the carbon market and weakening the incentive for low-carbon investments. To prevent this, policymakers must coordinate both policies by tightening carbon budgets to stabilize CO2 prices while promoting renewable ene
“China’s carbon pricing policy and renewable energy subsidies, particularly in China’s 2020 policy targets”
Introduction:
This case study highlights how renewable energy subsidies in China could lead to a collapse in CO2 prices, providing evidence for the need for a stricter carbon emission cap to stabilize the market.
Globally:
Rising CO2 emissions are a major driver of climate change, with ineffective policy coordination slowing efforts to curb them. Conflicting carbon pricing and renewable energy subsidies can reduce the impacts of good policies, hindering the transition to clean energy and worsening the climate crisis.
China:
China is one of the fastest-growing nations, and with this growth comes environmental decay. This is why it is crucial to implement effective solutions in the country and immediately start working towards using green energy.
Carbon Pricing Policy & Renewable Energy Power Subsidy Policy
The Goal:
The goal of the carbon pricing policy in China is to reduce greenhouse gas emissions by making fossil fuel-based energy more expensive, thereby incentivizing lower emissions and investment in cleaner technologies. The renewable energy power subsidy policy aims to increase the share of renewable energy in China’s electricity generation by making renewable energy more cost-competitive with fossil fuels. Aiming to reduce prices for renewable energy can work hand in hand with the carbon pricing policy to incentivize the public to invest into greener energy sources.
The Methods:
The research methods in this study use a partial equilibrium model to analyze the interaction between carbon pricing and renewable energy subsidies, with an empirical case study of China’s energy and climate targets for 2020.
The Findings and Impacts:
The study finds that China’s renewable energy subsidies could lead to a collapse in CO2 prices, reducing the effectiveness of carbon pricing in driving low-carbon investments. To stabilize CO2 prices and ensure both policies work together, tightening the carbon emission cap is necessary. The main obstacle encountered is the potential conflict between renewable energy subsidies lowering CO2 prices, which weakens the carbon pricing mechanism. The outcomes reveal that while renewable energy subsidies effectively promote clean energy growth, they inadvertently lower CO2 prices, reducing the impact of carbon pricing on emissions reduction. The study highlights the importance of carefully coordinating carbon pricing and renewable energy subsidies to avoid policy conflicts, suggesting that future policies must account for potential interactions to ensure both emissions reduction and renewable energy targets are met effectively.