The Guangdong Emissions Trading Scheme
Abstract
A pilot carbon emissions trading scheme (ETS) has been launched for three years in the Guangdong (GD) Province in China, with the power industry contributing nearly 66% of the covered CO2 emissions. This article reviews the policy design of the power sector in the GD ETS, and finds that the percentage of paid allowance is the primary factor reflected in the carbon cost for generators with an average efficiency. The ways the GD ETS influences the costs and profits of power plants are our primary focus.
The impacts of carbon cost on the overall cost of 300 MW, 600 MW and 1,000 MW plants are analyzed. The results indicate that the ratio of carbon cost to total cost is about 0.5% for the power plants in the GD ETS. This small percentage has little influence on plant operations. The impacts of the carbon cost on the cash flow of the three sizes of plants are assessed by their internal rates of return. A critical curve is developed and shows the benefit scope for the plants at a specific paid allowance and carbon price. This can be used by governments to improve policy design and by the enterprises to manage their carbon assets.
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