Carbon emissions control policies in China's power generation sector

Purpose - The purpose of this paper is to examine the potential for emissions control policy using the example of the power generation sector in China. Design/methodology/approach - The analytical model is developed using a joint production function, where carbon emissions and electricity are jointly produced using capital and fossil fuel inputs. Abatement of emissions can be achieved by investment in production capital that improves the production efficiency or abatement capital that removes the emissions. The results are estimated using data from China's electricity generation sector. Findings - The analytical model shows that economic growth can be achieved while still keeping the emission stock at a stable level. The results show that the level of the tax required to stabilize emissions depends greatly on the efficiency of abatement activities. As an illustration of this result, one finding shows that the required emission tax would be reduced greatly from 16 to 5 yuan/ton of emission when the abatement technology is improved from removing 10 to 30 percent of emissions flow. Research limitations/implications - The lack of carbon capture and storage technology in the real-world limits the ability to estimate some of the results from the economic growth model. Originality/value - Unlike many other papers, the empirical analysis is based on conditions from the economic model. In contrast to previous work that models emissions as an input into the production process, the model and estimation are consistent with the joint nature of electricity and emissions production.