Can China's energy quota trading impact the market performance and policy effects of carbon emissions trading?

Abstract

With the gradual shift from dual control of energy consumption to dual control of carbon emissions, energy quota trading (EQT) and carbon emissions trading (CET) policies will be implemented in parallel in China. EQT policy will significantly affect the market performance and policy effects of CET, which consequently affects the dual control of carbon emissions. Therefore, constructing a system dynamics model coupling the national CET, EQT, and electricity markets, this paper researches the impact of EQT policy and its parameter design on the market performance and policy effects of CET through scenario analysis. The results show that: (1) Implementing EQT policy will reduce CET price and trading volume, negatively affecting CET market performance. This indicates that there is a certain substitution between EQT and CET. (2) EQT policy can enhance the emission reduction and decarbonization effects of CET policy. By curbing thermal power investment and generation and promoting green power, the EQT policy reduces carbon emissions by about 4.87% and optimizes the power supply structure. (3) To scientifically design the EQT policy parameters, lower energy saving targets and energy quota benchmark prices can alleviate the negative impact on CET market performance, but are not conducive to improving CET policy effects.