Analysis of DSM Programs under the Clean Development Mechanism Using CGE Model

This paper uses a computable general equilibrium to analysis the economical and environmental impact of demand-side management program. Aiming at the DSM program of improving energy efficient, the paper deeply study the changes of economical and environmental of demand side management program under the clean development mechanism which brought subsidies. The study found that the clean development mechanism would increase the welfare. The demand-side management program would increase economic welfare if the ratio of unit cost of electricity savings to price of electricity is 0.4 or lower even without clean development mechanism. If the ratio is greater than 0.4, the program under clean development mechanism would be needed to achieve positive welfare impacts. The welfare impact depends on the price of carbon credits the program generates. For a given level of welfare impacts, the demand side management program under the clean development mechanism would reduce the emissions.