Emissions trading and technology adoption: An adaptive agent-based analysis of thermal power plants in China

Market-based environmental policy can strongly affect both technological advancement and the diffusion of less pollution-intensive or less cost-intensive abatement technologies and facilities. This study applied an agent-based model to examine the effects of an emissions trading system on the NOx technology adoption of power plants in China. The results indicate that an emissions trading system influences obsolete technologies with lower removal levels, but it does not promote the adoption of the most advanced technology. Most power plants will adopt the best available technology under an emissions trading program. In addition, national emissions trading encourages power plants to adopt technologies with relatively higher removal rates compared with separate regional emissions trading systems, but a national program decreases the adoption of most advanced technology. Further, initial allowance allocations based on concentration standards rather than on generation performance standards may promote power plants to adopt the newest technologies more quickly.