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Structural Substitution Rather Than Efficiency Improvement in Thermal Power Sector Achieved by China’s Pilot Carbon Markets

Author

Listed:
  • Haoqi Qian
  • Yanran Gong
  • Shouyang Wang
  • Libo Wu

Abstract

Thermal power sector plays a crucial role in achieving China’s climate mitigation targets due to its large contribution to the nation’s overall carbon emissions. This study constructs a unique nationwide unit-level dataset containing more than 1,000 coal-fired power units (CPUs) to evaluate the heterogeneous effects of China’s pilot Emission Trading Schemes (ETSs). Results disclose that the pilot ETSs generate a prominent reduction effect of coal consumption through electricity production shrinkage and output substitution among generation units. CPUs’ energy efficiencies have barely improved in the short run and even have been worsened in the longer term. From the market perspective, active tradings, higher prices and stringent benchmark standards are conducive to efficiency improvement but also bring uncertain impacts on coal abatement. Stringent benchmark standards and China’s administrative dispatching system contribute and strengthen the structural substitutions toward high-capacity CPUs. Finally, counterfactual simulation shows that the structural substitutions result in uneven distributions of air pollution co-benefits brought by the pilot ETS. JEL Classification: C21, Q48, Q54

Suggested Citation

  • Haoqi Qian & Yanran Gong & Shouyang Wang & Libo Wu, 2025. "Structural Substitution Rather Than Efficiency Improvement in Thermal Power Sector Achieved by China’s Pilot Carbon Markets," The Energy Journal, , vol. 46(3), pages 243-263, May.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:3:p:243-263
    DOI: 10.1177/01956574251315386
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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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