Sulfur dioxide emission reduction of power plants in China: current policies and implications

Abstract Electricity generation by conventional fossil fuel power plants have caused severe environmental problems worldwide. Besides greenhouse gas emissions which has global impacts on the climate, there are also pollutant emissions like sulfur dioxide which endanger the local environment. In particular, for developing countries who often highly rely on coal for power generation due to their resource endowment and the competitive costs of coal, the issue of environment pollution caused by coal-fired power plants is getting increasingly severe. Therefore, various solutions should be combined and implemented to address the issue, including environmental regulation, and economic and financial incentives. This study conducted an industry survey in 7 coal-fired power plants in China to collect detailed data in the field to examine the costs and benefits of flue gas desulfurization. Currently, coal-fired power plants in China which install and properly operate flue gas desulfurization equipment can receive 15 Yuan/MWh premium tariff on top of their on-grid tariffs. However, this study shows that this incentive is insufficient to cover the flue gas desulfurization costs of most of the sample plants. More solutions, both regulatory and market-based, should be considered to address this issue. Firstly, under China's current regulated power plants dispatch scheme, allocating generation hour based on the pollutant emission would provide strong incentive for sulfur dioxide mitigation. Secondly, it is suggested to provide more supportive financial environment for flue gas desulfurization industry by fiscal supports, diverse financing accesses, and innovation financial and business models. Thirdly, more environmental regulation tools such as emission cap and emission discharge fees should be set properly and examined carefully, to optimize their impacts on economy, society and environment. Finally, the analysis and results of this study can also be applied in other fields such as denitration and dedusting of coal-fired power plants.