Top researchers from the Economics of Energy Innovation and System Transition (EEIST) project have released a report outlining power sector reforms developing in China and the increasingly complex landscape of climate and energy policies intended to support carbon neutrality.

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The results show that, whichever modelling approach is taken, the impending dominance of solar and wind power in China is clear. However, the implications of this transition for costs and wider macroeconomic impacts are more subtle. Costs could increase or decrease depending on what pricing mechanisms are used and our assumptions about the exact power mix. Impacts on GDP and investment appear to be positive in high renewable scenarios, but the impacts on employment vary by sector and are more balanced in the analysis.

These findings have serious implications for a range of policy issues in China. They suggest power sector reforms, and specifically market-based pricing mechanisms, have the potential to support China’s carbon neutrality goal. They also make clear the role of the Emissions Trading Scheme (ETS) in supporting the goal, through a meaningful carbon price. Finally, both sets of analysis make clearer than ever the need to address a range of potential barriers to rapid deployment of renewables, whether financial, technical, legal or otherwise.

Find out more about Power Sector Futures in China: A Multi-Model Approach to Understanding China’s Carbon-Neutral Pathways and Power Sector Reform by clicking on the publication link.