Impact on global warming of development and structural changes in the electricity sector of Guangdong Province, China

Studies of Chinaʹs energy development and carbon trading opportunities under CDM using aggregate approaches often face two kinds of difficulties: regional variations and economic and institutional constraints faced by decision makers at the sub-national level that are hard to model. This study initiates research that disaggregates the recent development of the Chinese electricity industry in a case study of Guangdong Province. We highlight a bifurcated development of efficient and inefficient generation technologies in the past 10 years, and link it to the institutional arrangements for electricity supply, inadequate financial markets and specific policy incentives. We also find, using Guangdong data, that carbon emissions from the Guangdong electricity generation follows a declining trend from 0.29 million tons per TWh in 1990 to 0.24 in 1998, with a planned level of 0.20 million tons in 2010. An attempt to derive a shadow price of carbon by correlating heat rates with unit costs of generation shows some problems in the cost data. In light of the CDM baseline discussions, our study suggests that credible and cost-effective baselines in Chinese power will demand disaggregation along vectors of regions and technologies, and require an understanding of economic and institutional characteristics of energy decision making.