The Impact of Carbon Emission Trading on Renewable Energy: A Comparative Analysis Based on the CGE Model

Abstract

This study examines the effects of carbon emission trading on renewable energy consumption in China. The research applies the CEEEA2.0 model to simulate the economic, energy, and environmental impacts of carbon trading from 2018 to 2030. The CEEEA2.0 model is a recursive dynamic computable general equilibrium model that incorporates multiple households, sectors, and an energy and environment module. Four scenarios are considered: the Business as Usual (BaU) scenario, the Emission Trading Scheme (ETS)-benchmark scenario, and the ETS-strengthened and ETS-enhanced scenarios. The findings reveal that carbon emission trading positively influences electricity consumption, resulting in a higher preference for renewable energy due to reduced price disparities between renewable sources and fossil fuels. Consequently, electricity generation from renewable sources increases in all scenarios compared to the BaU scenario. However, the share of renewable energy is not substantially affected by carbon emission trading due to the complex interplay of factors, including substitution and income effects. The study further highlights that carbon trading significantly reduces coal usage and partially increases the overall proportion of renewable energy. These results underscore the significance of establishing ambitious carbon reduction targets and continual efforts to shift towards clean energy sources.