Simulation analysis on policy interaction effects between emission trading and renewable energy subsidy

Abstract

Greenhouse gas emission regulation and renewable energy promotion policies have been implemented in many countries. Yet these two kinds of regulation policies have complex interactions between each other, and can either enhance or reduce the overall emission reduction efficiency. If not well tuned, these regulation policies may deviate from their original intention and lead to unnecessary social cost. Hence, the policy effectiveness, cost effectiveness, and dynamic efficiency of different policy mixtures between emission trading and renewable energy subsidy are studied based on a novel dynamic simulation platform of power economy and power system. Simulation results show that these two kinds of regulation policy can coexist, but a good coordination between the emission trading and the renewable energy subsidy can achieve better emission reduction outcomes.