The People’s Republic of China is experiencing sustained high economic growth, and with it some environmental challenges. Its 12th Five Year Plan (2011-2015) lays out plans to “gradually develop a carbon trading market”. In preparation, five cities and two provinces in China have been directed to develop and implement pilot emission trading schemes (ETS)s.
To help inform the design of China’s national ETS, and supplement the learning process started with the pilot ETSs, the International Energy Agency (IEA), together with China Electricity Council (CEC), China Beijing Environment Exchange (CBEEX), and Environmental Defense Fund (EDF), developed and ran a simulated ETS for the Chinese power sector.
This paper considers the context of China’s power sector and the country’s steps towards a national ETS. It describes how simulations can help policy development, how this simulation was built, the positive results and implications for a national Chinese ETS.