Evaluating Efficiency and Fairness of Renewable Portfolio Standard in China

Abstract

This study evaluates the efficiency and fairness of China's Renewable Portfolio Standard (RPS) using a bi-level numerical model. The model comprises a regulatory level that sets the required share of renewables and a market level where electricity producers and consumers respond to these policies. In a perfectly competitive market, carbon pricing is identified as the most efficient policy to promote the development of renewable energy, while the RPS closely approximates an optimal policy tool. By mandating a certain percentage of renewable energy generation, the RPS significantly promotes renewable energy development and substantially reduces emissions. Additionally, RPS improves welfare levels in the central regions, addressing regional welfare disparities. RPS is deemed appropriate, especially considering that China's carbon pricing mechanisms are not yet fully supportive of renewable energy development.