Green Power Calls Market Means

In order to retain the "APEC Blue," we must turn to relying on market measures to reduce emissions of carbon dioxide and other pollutants. Among them, the role of energy-saving emission reduction market measures such as green electricity prices, resource taxes, and carbon emissions trading should not be underestimated.

"APEC Blue" gradually left us, but discussions on energy conservation, emission reduction and pollution alleviation continued to heat up.

For many years, China's energy-saving and emission-reduction targets have mainly been forced by administrative means. Administrative measures are effective in reducing energy consumption and alleviating pollution, but they are not economically efficient. Moreover, as China’s carbon emission reduction commitments continue to increase, mandatory reductions relying solely on administrative measures have gradually become infeasible, and China must turn to rely on market measures to reduce emissions of carbon dioxide and other pollutants.

At present, China’s power source is mainly thermal power generation. In 2013, thermal power generation accounted for nearly 79% of total power generation. Therefore, reducing carbon dioxide emissions from thermal power plants will have significant implications for China’s energy conservation and emission reduction targets and the development of a green energy strategy. Currently, there are three main market means for energy saving and emission reduction in the power system: green electricity prices, resource taxes, and carbon emissions trading. Their role in developing green energy strategies should not be underestimated.

Green electricity price "three swords are made"

On November 15th, Premier Li Keqiang pointed out at the executive meeting of the State Council: “The price reform does not advance, and the key issue of market-oriented reform is tantamount to not seizing it!” Although China’s electricity price is still determined by the government, it tries to make electricity prices reflect environmental protection costs as far as possible. The National Development and Reform Commission has also launched some targeted power pricing policies.

Such as the ladder price policy, in June 2012, the National Development and Reform Commission proposed for the first time that household electricity use will implement the “ladder price”; in 2013 it was further extended to the electrolytic aluminum industry. The ladder electricity price can realize differentiated pricing of subdivided markets through segmented electricity, which can improve energy utilization efficiency to some extent.

Another example is the environmental protection price policy. In order to increase the enthusiasm of desulfurization, denitrification and dust removal in thermal power plants, the National Development and Reform Commission has issued a subsidy policy to implement desulphurization and denitrification electricity prices for thermal power plants that install desulphurization, denitrification and dust removal devices and operate normally. At present, the desulfurization price increase standard is 1.5 cents per kWh, the denitrification price is 1 cent, and the dedusting price is 0.2 cent. This pricing mechanism has yielded significant results. The desulfurization electricity price was implemented in 2004, and the proportion of thermal power plants that currently install desulfurization equipment has exceeded 90%. The denitrification electricity price started trial operation in 2011 and has received some results so far.

The third pricing strategy for green electricity prices is "discriminatory electricity prices." In October 2006, the National Development and Reform Commission requested local governments to impose punitive high tariffs on obsolete and restrictive energy-consuming enterprises in the cement, electrolytic aluminum, and steel industries. However, this policy has not been strictly implemented by the local government. In July this year, three ministries and commissions including the National Development and Reform Commission jointly issued a document and again asked local governments to do a good job of implementing discriminatory electricity prices and raise the previously punitive premium from 2 cents per kilowatt-hour to 4 cents.