Decarbonization roadmap for China’s energy sector in the context of carbon futures trading: An energy-environment-economy assessment perspective

Abstract

By virtue of the hedging and price discovery function, carbon futures trading may help carbon market function more effectively. Is it necessary to establish carbon futures trading in China? The authorities have endorsed the idea since 2015, however, the scheme has not yet started; no antecedent pre-assessment quantitative research has been carried out. Therefore this study that attempts to fill this gap in the literature, could be of real significance. Through deriving a potential decarbonization roadmap, this study tries to give some clues pertaining to the converted mitigation strategy imposed by carbon futures trading in China. A model chain has been proposed, which is composed of the Optimal Production Decision-making Model for Producers, Life Cycle Impact Assessment, Monetization, and Genetic Algorithm based optimization, to quantify the environmental benefits (including improvements to human health, ecosystem damage and increased temperature induced GDP losses) of the assumed mitigation trajectories. By setting the maximization of environmental benefits as the objective, the optimal decarbonization roadmap with carbon futures trading is derived. Results show that the optimal emission reductions for power enterprises (covered by the carbon market) for the next 10 years (2021–2030) are around 3.27 billion tonnes CO2e. If 36% of this amount is assigned to previously discussed mitigation trajectories, it is found that 106.98 GW ultra-super critical units, 160.85 GW mono-Si PV facilities and 167.26 GW doubly-fed induction generator wind capacity should be installed. Overall environmental benefits are 4.6 trillion CNY2018, over 5% of China’s 2018 GDP. Results demonstrate the optimal emission reductions and potential decarbonization roadmap for China’s power enterprises (those covered by the carbon market) under the context of carbon futures trading, which can be an important reference for the authorities and therefore encourage the establishment of the scheme.

The “energy rebound effect” within the framework of environmental sustainability

“…Within the red cluster, the analysis of the energy rebound effect is conducted from a broad and theoretical standpoint, with China being a dominant presence in the studies (e.g., Du, Liu, & Zhao, 2023; Kong, Mu, et al, 2023; Lange et al, 2021; Li et al, 2023; Sorrell, 2014; Zhu & Lan, 2023). In the green cluster, discussions encompass the definitions, constraints, and determinants of the energy rebound effect.…”