The Integrated Effect of Carbon Emissions Trading and Pollution Rights Trading for Power Enterprises—A Case Study of Chongqing

Abstract

To control growing environmental problems, the pollution rights trading (PRT) center was established in Jiaxing in 2007, and China officially joined the carbon emission reduction market (NCET) in 2011. Since power enterprises are the main participants in the NCET market and PRT market, the integrated effect of the NCET market and PRT market on power enterprise profit and the regional environment is one of the major issues that needs to be taken into consideration. Based on system dynamics (SD) theory, we propose an NCET-PRT simulation model for power enterprises in Chongqing. Through analyzing parameters of carbon trading price, free ratio, and emission trading prices, 12 different simulation scenarios are configured for sensitivity analysis. Based on the simulation results, the following observations can be obtained: (1) NCET and PRT can effectively promote the performance of enterprises’ carbon emissions reduction and regional pollutant emission reduction but will have a minor negative impact on the industrial economy at the same time; (2) The trading mechanism is interactive; if the carbon emissions trading (NCET) mechanism is implemented separately, the emission of pollutants will be reduced significantly. However, the implementation of pollution rights trading (PRT) alone cannot significantly reduce CO2 emissions; (3) At an appropriate level, NCET and PRT can be enhanced to achieve a maximum emissions reduction effect at a minimum economic cost.