Would China’s power industry benefit from nationwide carbon emission permit trading? An optimization model-based ex post analysis on abatement cost savings

The nationwide carbon emission permit trading scheme has been launched in China’s power industry sector by the end of 2017. The estimation of abatement costs savings from carbon emission permit trading can provide valuable guidelines and support to environmental regulatory policies on controlling CO2 emissions. By applying a parametric and nonparametric integrating approach and conducting an ex post analysis in two scenarios (i.e., with and without carbon emission permit trading simulation), this study provides a simulative calculation of the opportunity abatement cost savings and the marginal abatement cost savings from carbon emission permit trading in China’s power industry of 30 provinces. The simulation results show that: (i) A 13% annually average potential on the opportunity abatement cost savings (i.e., 1024 billion yuan) would be realized if introducing a nationwide emission permit trading system in China’s power industry during 2011–2015. (ii) Meanwhile, the marginal abatement cost savings that range from 39 to 47 yuan/ton would be realized through emission permit trading. (iii) Provinces of Xinjiang and Henan show the largest absolute opportunity abatement cost savings from trading, while Qinghai province shows the highest percentage increase in opportunity abatement cost savings. (iv) Although there is significant difference in the marginal abatement cost among provinces, the marginal abatement cost savings from trading would occur for most China’s provinces.