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Assessing the effects of emissions trading systems on energy consumption and energy mix

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  • Tan, Xiujie
  • Sun, Qian
  • Wang, Meiji
  • Se Cheong, Tsun
  • Yan Shum, Wai
  • Huang, Jinpeng

Abstract

The carbon emissions trading system (ETS) is expected to achieve energy transition and carbon-neutrality goals by theoretically reducing energy consumption and adjusting the energy mix. This study aims to provide firm-level evidence on these effects by adopting the distribution dynamics approach, which could reveal historical transition probabilities and predict long-term evolutions. By using the unique dataset from the Hubei ETS pilot in China, this study can serve as an example for promoting ETS. The results indicate that: (1) Most firms converge to a lower relative energy consumption under ETS, resulting in reduced total energy consumption. However, it would take a long time to achieve energy transition. (2) The primary peak of the relative coal consumption distribution reduces from 0.07 to 0.02 under ETS, implying a decline in coal use. Meanwhile, the share of electricity consumption increases, indicating a switch from coal to electricity. (3) ETS would place a limit on fossil energy, and an even stricter limit on coal for firms with high energy consumption. (4) Both the total and share of energy-induced carbon emissions also decrease, implying that ETS might realize the decoupling of economic growth from fossil energy and carbon emissions.

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  • Tan, Xiujie & Sun, Qian & Wang, Meiji & Se Cheong, Tsun & Yan Shum, Wai & Huang, Jinpeng, 2022. "Assessing the effects of emissions trading systems on energy consumption and energy mix," Applied Energy, Elsevier, vol. 310(C).
    • Handle: RePEc:eee:appene:v:310:y:2022:i:c:s0306261922000642
    DOI: 10.1016/j.apenergy.2022.118583
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