The Effect of China’s Carbon Emissions Trading System on the Power Sector’s CO2 Emission Reduction Based on the "West-East Power Transmission" Project

Abstract

Excessive CO2 emissions from the power sector are the biggest problem facing the realization of the world's and China's environmental goals. China has high expectations that the introduction of a carbon emissions trading system (CETS) will address the power sector’s CO2 emissions more economically. This paper considered the characteristics of China's cross-provincial power transmission and applied a time-varying DID model to examine the CETS’s impact on the power sector’s CO2 emissions in the primary provinces of the "West-East Power Transmission" project (WEPT). Subsequently, mechanism and heterogeneity are investigated. Research conclusions: (1) From the viewpoint of the power system, the CETS reduces the power sector's CO2 emissions in the primary provinces of WEPT. (2) By influencing the cleanliness of the power structure, the CETS can decrease the power sector's CO2 emissions, but the CO2 emission reduction potential of renewable energy remains to be explored. (3) CETS can more effectively reduce CO2 emissions from the power sector in the southern channel of WEPT and provinces with high levels of CETS activity and environmental regulation intensity. Finally, recommendations are made for promoting the construction of the CETS and WEPT and effectively reducing the power sector’s CO2 emissions and other sectors.