Identifying Emissions Reduction Opportunities in International Bilateral Emissions Trading Systems to Achieve China’s Energy Sector NDCs

Abstract

Exploring more emissions reduction opportunities for China’s energy sector and lowering China’s decarbonisation costs are essential to fulfilling China’s nationally determined contributions (NDCs) and making China’s sustainable development more feasible. This study explored emissions reduction opportunities for China’s energy sector in international bilateral emissions trading systems (ETSs) using a CGE (computable general equilibrium) model. This study revealed that linking China’s ETS to those of regions with lower decarbonisation responsibilities, which tend to be developing regions, could lower China’s carbon prices, thus increasing China’s domestic energy supply and lowering energy prices (and vice versa). Meanwhile, the volume of emissions from regions linked to China also significantly affected the degree of the change in China’s carbon prices. Among these, ETS links to India and Russia could reduce China’s carbon price from 7.80 USD/ton under domestic ETS to 2.16 USD/ton and 6.79 USD/ton, allowing the energy sector and energy-intensive sectors to increase greenhouse gas emissions by 1.14% and 7.05%, respectively, without falling short of meeting its NDC targets. In contrast, as a consequence of links with the United States and the European Union, China’s carbon price could increase to 5.37 USD/ton and 1.79 USD/ton, respectively, which would limit China’s energy and energy-intensive sectors to emitting 5.45% and 2.24% fewer greenhouse gases in order to meet its NDC targets.