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How will sectoral coverage in the carbon trading system affect the total oil consumption in China? A CGE-based analysis

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  • Jiang, Hong-Dian
  • Liu, Li-Jing
  • Dong, Kangyin
  • Fu, Yu-Wei

Abstract

The increasing oil demand in China has brought negative issues, such as energy security risk, carbon emissions, and air pollution. Therefore, it is of considerable significance to rationally control total oil consumption and push it to peak as soon as possible to ensure national energy supply security and deal with climate change and environmental pollution. To this end, based on a computable general equilibrium (CGE) model, this study constructs a detailed carbon trading module to evaluate the socio-economic and environmental effects of the inclusion of different high oil-consuming industries in the emission trading system (ETS). Results show that, first, regarding total oil consumption control, when the ETS includes all high oil-consuming industries the total oil consumption and oil external dependence decrease most significantly. Second, in terms of environmental effects, the inclusion of the four high oil-consuming industries (i.e., Chemical, Non-Metal, Transportation, and Construction) has the best effect. It has the largest cumulative reduction of carbon emissions and the second-largest cumulative reduction of SO2 and NOX. Third, as for economic impact, the negative impact on GDP and the oil industry chain are the smallest when including the Chemical and Non-Metal industries in the ETS. Finally, this study conducted a series of sensitivity analyses, including key substitution elasticities and high international oil price, to verify the robustness of corresponding policy recommendations.

Suggested Citation

  • Jiang, Hong-Dian & Liu, Li-Jing & Dong, Kangyin & Fu, Yu-Wei, 2022. "How will sectoral coverage in the carbon trading system affect the total oil consumption in China? A CGE-based analysis," Energy Economics, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:eneeco:v:110:y:2022:i:c:s0140988322001682
    DOI: 10.1016/j.eneco.2022.105996
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    Cited by:

    1. Liu, Feng & Xu, Jie & Ai, Chunrong, 2023. "Heterogeneous impacts of oil prices on China's stock market: Based on a new decomposition method," Energy, Elsevier, vol. 268(C).
    2. Jiang, Hong-Dian & Dong, Kangyin & Qing, Jing & Teng, Qiang, 2023. "The role of technical change in low-carbon transformation and crises in the electricity market: A CGE analysis with R&D investment," Energy Economics, Elsevier, vol. 125(C).
    3. Yan Xiao & Yan Zhang & Jiekuan Zhang, 2023. "The Impact of Carbon Emission Trading on Industrial Green Total Factor Productivity," Sustainability, MDPI, vol. 15(7), pages 1-18, April.
    4. Zhang, Xiaokong & Chai, Jian & Tian, Lingyue & Yang, Ying & Zhang, Zhe George & Pan, Yue, 2023. "Forecast and structural characteristics of China's oil product consumption embedded in bottom-line thinking," Energy, Elsevier, vol. 278(PA).

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    More about this item

    Keywords

    Oil consumption; Emission trading system; Sectoral coverage; Computable general equilibrium;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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