Scenario analysis of the carbon pricing policy in China’s power sector through 2050: Based on an improved CGE model

Abstract In this study, an improved computable general equilibrium (CGE) model is developed, and 13 carbon dioxide (CO 2 ) emission scenarios comprising 1 business-as-usual (BAU) scenario and 12 emission-reduction scenarios are designed to evaluate the effects of carbon pricing policy, which includes carbon tax and carbon emission trading, on CO 2 emissions, CO 2 emission intensity, output, and energy consumption of China’s power sector during 2010–2050. Results show that carbon tax policy plays an important role in curbing CO 2 emissions but does not work very well in optimizing the energy structure in a short term. Carbon tax also decreases output, and the reduction of CO 2 emissions becomes significant as carbon tax rate raises. High carbon tax would significantly promote the reduction of CO 2 emissions in the long run. The output of the power sector would increase under the single carbon emission trading policy. CO 2 emissions will continually reduce when various sectors participate in carbon emission trading mechanism. However, the combination of carbon tax and carbon emission trading is hopeful to reduce CO 2 emissions of China’s power sector by 90602.15 Mt during 2010–2050 under the CT30ETAA scenario. Therefore, a policy that combines carbon tax and carbon emission trading is suggested to sharply reduce CO 2 emissions and help optimize the energy structure.