We investigate the impacts of carbon dioxide (CO2) emission regulations in different phases on the coal-fired power generators in China. Using a novel generator-level dataset of coal-fired generators from 2010 to 2018, we employ a structural approach to estimating production functions by capacity type. Our model considers heterogeneity in both the unobserved productivity and returns to scale across generators. We find substantial variation in both dimensions of heterogeneity, and generators with greater capacities are more efficient. Counterfactual analyses show that, compared with the emission restrictions during the sample period, the 2021 nationwide generator-level emission caps could reduce the aggregate coal costs and CO2 emissions by 1.69% and 2.03%, respectively. Furthermore, the new energy structure upgrading plan of replacing coal-fired generation capacity with non-fossil generation capacity can reduce the CO2 emissions by about 14.4%.

Professor Rong Luo is an associate professor of Economics at Renmin University of China. Her research field is industrial organization, including both empirical and theoretical analyses. She has worked on research topics including the product network effects, discrete choice demand models, firms' dynamic pricing game, vertical contracts, estimating firms' production function, and income inequality and firms' prices. Her projects focus on the smartphone market, electricity generation industry, platform industries, and retail industries. Her work has been published in Management Science, International Economics Review, International Journal of Industrial Organization, Journal of Economics & Management Strategy and Applied Economics. She received her Ph.D. in economics from The Pennsylvania State University.