Study On The Energy Market Mechanism Underlying The Background Of Carbon Trading

In the context of the worsening global climate,many countries around the world have begun to take some positive action on controlling greenhouse gas emissions.Carbon trading mechanism is theoretically regarded as the most effective market regulation mechanisms,which effectively address the external problem at a low cost and enable a country to achieve the objectives of emission reduction commitments and development patterns conversion.However,in the case of the operation of EU ETS and the pilot operation of carbon trading in China,there have been problems of low carbon price and failure of the mechanism.Many companies in China believe that carbon trading increases their own costs,thus they are unwilling to participate in the carbon trading market and more reluctant to consider the problem of low-carbon production model.Moreover,most of the local governments also have the fear that the implement of carbon trading will affect the economic development of the region.All these thoughts are not consistent with the original intention of the carbon trading mechanism.Since the carbon trading and the energy consumption are closely related,it is of great significance in building a clean,low-carbon,safe and efficient modern energy system to study how the carbon transaction affects the energy consumption market and whether it plays its regulatory role.The existing literature focus heavily on the carbon trading mechanism itself,but there are relatively few literature on the relationship between carbon trading and energy market.Some relevant literature only focus on analyzing the price transmission mechanism between them.Although carbon trading and energy market are closely related,and the purpose of carbon trading is to regulate the energy consumption market through the role of the economic entities,the related research on the mechanism is relatively deficient.Some scholars only use the simulation method to judge the effect of the carbon trading mechanism,which is not quite convincing.This paper holds that carbon emission permit has both the attributes of production factors and commodity attributes,which affect the production decisions and investment decisions of the companies,and then change the structure of energy consumption market.Based on this,the economic problem proposed in this paper is:what is the effect of carbon trading on the energy consumption market?This question can be further divided into the following sub-issues:Will carbon trading reduce the consumption of traditional fuels from micro perspective?Will it be an incentive to reduce carbon emissions for companies?For different types of companies,whether the impact of carbon trading on production decision-making and the impact of technology investment in carbon emission reduction are different?In the long run,can carbon trading optimize the structure of the energy consumption market?On the basis of existing research results,this paper used the attribute of carbon emission permit as the starting point,building the link between the carbon trading market and the energy market.Based on the market equilibrium theory,property rights theory,etc.,from the micro and macro perspective,This paper analyzed the mechanism of the carbon trading influence on energy consumption market.The content of the thesis is as followed.Firstly,in order to analyze the close relationship between carbon trading market and energy market,this paper set up the analysis framework of the energy market under the assumption of the existing carbon trading market and from the perspective of the attribute of carbon emission permit.Secondly,based on the CGE model,the model in this paper divided all productive companies into two types:traditional-energy-dependent companies and new-energy-dependent companies.considering the factors of technology,company type,carbon price fluctuation,etc.,the paper established the model of company’s energy consumption decision under carbon trading.From the perspective of energy consumption,carbon emissions,investment decision,the paper analyzed the effect of carbon emission reduction,technology transfer,and carbon price volatility transmission,and derived the supply and demand curve of carbon trading market.Thirdly,according to the actual situation of energy consumption in China,this paper establish a fixed effect model and a variance-clustering OLS model,using the empirical result to test the influence of carbon trading mechanism on the traditional energy consumption and efficiency.This paper summarized the main factors affecting energy consumption including:economic output,population scale,industrial structure,energy technology and energy prices.On the basis of these factors,adding dummy variables representing the pilot operation of carbon trading mechanism,this paper used panel data in the seven pilot provinces and the expansion of the data-set with seven non-pilot provinces to run the regression.Finally,the paper made further analysis on the operation of carbon trading market in China,the component of carbon trading system in China.Combined with the previous research,the paper found some problems in current carbon market mechanism and make some recommendations.The conclusions of the thesis is as followed.(1)Carbon trading market influences company’s decision-making of energy consumption decision and thus the energy consumption market through carbon emission permit.From the perspective of the attribute of carbon emission permit,as both the factor of production and a tradable commodities,it affects the production and investment decisions of the companies,and then optimizes the structure of the whole energy consumption market.(2)Considering the influence of carbon emission permit,the company will find a new equilibrium on the level of energy consumption,carbon emission reduction and investment on relevant technology.However,the result differs according to the company’s type.As the increasing dependence on traditional energy,the new-energy-dependent companies will augment the amount of traditional energy consumption sharply and will increase the investment on carbon emission reduction technology,while the traditional-energy-dependent companies will be less concentrated on the carbon emission reduction.(3)Both the level of carbon-emission-reduction technology and the carbon price play a regulatory role in the energy consumption market.For the traditional-energy-dependent companies,the improvement of the level of carbon emission reduction technology or The increase of carbon price will give them positive incentives to energy saving and emission reduction,while negative incentives will be generated for manufacturing companies which are mainly depended on new energy.Therefore,it will bring a significant effect to encourage the traditional-energy-dependent companies to increase carbon emissions through the improvement of the carbon-emission-reduction technology or the increase of the carbon price.(4)The demand and supply curve on the carbon trading market is special,mainly because of the possible role transition of the traditional-energy-dependent companies.As their price elasticity is not fixed,with the increasing carbon price,those companies will change from a demander to a supplier on the carbon trading market.(5)According to the empirical result,it indicated that the operation of carbon trading mechanism plays a significant effect on reducing energy consumption and improving the coal utilization efficiency level.However,the effect of carbon price is insignificant.(6)We could make an enhancement of effectiveness of the carbon trading in following three aspects:adjust the assessment criteria to encourage companies to invest in technology;make a reasonable amount to ensure the reasonable level of carbon price;expand the product category to improve companies’participation in the market.