On the Effectiveness of the Abatement Policy Mix: A Case Study of China’s Energy-Intensive Sectors

Abstract

To achieve carbon emissions control targets, policymakers often need a basket of policies to account for the complexity of abatement. The instruments in the policy mix are often interconnected. It is of great importance to study how different abatement policies perform in practice-in other words, to evaluate the effectiveness of the abatement policy mix. This paper builds a multisector partial equilibrium model and then studies the policy effectiveness using data from two energy-intensive sectors in China, namely, the iron and steel sector and the cement sector. The results show clear evidence that these policies interact, and the policy mix is not a simple aggregation but rather differs across sectors, which leads to fundamentally different scenarios in terms of energy savings, emissions reductions and production behaviors. Energy-savings subsidies can increase production and profit with a lower equilibrium level of carbon prices, whereas output-based rebating of allowances reduces production and is associated with higher carbon prices.

Research on the Impact of Output Adjustment Strategy and Carbon Trading Policy on the Response, Stability and Complexity of Steel Market under the Dynamic Game

“…Wei et al [11] proposed a profit maximization model for scrap steel remanufacturing with random demand under the carbon quota trading mechanism, and then studied the impact of carbon price and carbon emission reduction investment parameters on optimal output, carbon emission reduction investment, total profit, and total carbon emission. Liu et al [12] established a multi-sector partial equilibrium model, and then used the data of China's two energy intensive sectors, namely the steel sector and the cement sector, to study the effectiveness of the emission reduction policy portfolio, including carbon trading policies. Dai et al [13] evaluated the economic impact of China's national independent contribution (INDC) through emissions trading plans (ETS) and renewable energy policies.…”

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