Parallel or cross implementation? Carbon emission trading and renewable portfolio standards in China

Fossil fuel combustion significantly contributes to carbon emissions, making it crucial for countries to adopt both Carbon Emission Trading (CET) and Renewable Portfolio Standards (RPS). These two policies overlap in terms of target objectives, implementation scope, and expected outcomes, necessitating a discussion on their coupling mechanisms and joint implementation approaches. Regarding the joint implementations of the two policies and the possible impacts of Chinese Certified Emission Reduction (CCER), the study constructs equilibrium models for four policy combinations: parallel, cross, parallel plus CCER, and cross plus CCER. Based on theoretical analysis, a system dynamics simulation is conducted to explore the relevant dynamic changes and development trends. There are several important results: Parallel implementation without CCER does not provide better environmental benefits while exerting higher cost pressures on conventional power plants; cross implementation is beneficial to the decline of carbon emissions in the long-term, although it may harm the incentives of conventional power plants to reduce emissions; the impact of CCER on the emission reduction inputs of conventional power plants depends on the setup of the offsetting ratio and tends to be more positive under high-emission scenarios; the joint implementation of CET and RPS has a decisive role in the Tradable Green Certificate (TGC) market: TGCs price will remain low for a long-term under parallel implementation, while it can remain relatively stable under cross implementation. The study focuses on the joint implementation of CET and RPS, which provides a reference for policy choices under the carbon peak goal.