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Commentary Praises Berkeley Lab Paper on China Electricity Market Reform

September 27, 2023

China has implemented reforms in its electricity markets as part of its goal to reach carbon neutrality by 2060, but the country has not fully realized the potential cuts in emissions. Recent work led by Jiang Lin of Lawrence Berkeley National Laboratory (Berkeley Lab) helped explain why.

The “results begin to fill a notable gap in our understanding of what mediates the effectiveness of electricity market reform in China and other emerging economies,” write the authors of a subsequent commentary highlighting the research. Both the commentary and the original research were published in the journal Nature Energy.

In 2015, China began to allocate electricity generation based on economic dispatch for individual power facilities. Lin and coauthors found that nearly half of the potential carbon dioxide emissions reduction and social welfare gains from this policy had not been realized. The problem stems from local protectionism, the study found, where provincial governments favor assets owned by local state-owned enterprises (SOEs) over those owned by central SOEs, which tend to be more efficient.

“This is a big deal: the researchers calculate that annual excess CO2 emissions in one province, Guangdong, can reach 1.5 million tons,” write Valerie J. Karplus of Carnegie Mellon University and Da Zhang of Tsinghua University. “If the same ratio applies to the whole country, that reaches more than 10 million tons of CO2 annually, equivalent to adding multiple additional industrial facilities today.”

Karplus and Zhang argue that Lin and team have uncovered a topic that needs further study to look at the impacts of power market reform design more deeply. The topic is relevant worldwide, they note, since most developed countries permit considerations other than cost when dispatching power generation.