Comparative Analysis of Carbon Tax and Carbon Emission Trading Policies in the Context of Carbon Emission Reduction: Based on the Perspective of the Power Industry

Abstract

In this paper, we focus on China's power sector to investigate ways to improve emissions reductions in the context of global warming and rising carbon emissions. This paper reviews the current state of adapted carbon emission reduction policies in China's power industry and assesses the potential effectiveness of two mechanisms, carbon taxation, and carbon trading, in achieving substantial emissions reductions. China's power sector is a major contributor to global carbon emissions, and the paper explores the balance between short-term carbon tax policies and long-term carbon trading strategies aimed at promoting an early peak in carbon emissions as well as carbon neutrality within the country. This research finds that the carbon tax can have positive impacts in the short term, whereas carbon trading exhibits higher efficiency in the long term. The paper addresses this by proposing a combination of the two mechanisms to achieve effective emissions reductions in the power industry, supporting China's goal of achieving carbon neutrality by the time of 2060. Finally, we explore the feasibility and benefits of implementing a carbon tax, highlighting its suitability for near-term implementation in the power industry. We conclude that a combination of carbon taxes and carbon trading can make a significant contribution to China's carbon peak and carbon neutrality targets.