How will auctioning impact on the carbon emission abatement cost of electric power generation sector in China?

China will enact a national emissions trading system in 2017. The rules for the initial allocation of emission allowances have not been settled yet. This paper assesses the effect of auctioning as an initial emission allowance allocation methods of the China electricity power generation sector. This study employs a combined model with modified Trans-log production function, dynamic simulation model and multi-objective linear programming to provide more realistic results. After estimating the optimal electric power sources structure and technological structure under different auctioning rates, this paper calculates the abatement cost of the China's electric power generation sector. When the allowance is free, the carbon shadow price will be 206.12 Yuan/ton. When 5% allowance is auctioned, the price will be 216.91 Yuan/ton. When the auctioning rate increases, the carbon emission abatement cost increases accordingly, as does the growth rate. The results also show that when the allowance auction rate is 5%, the marginal abatement costs for coal-fired power generation and clean power generation are 0.123 Yuan/kW h and 0.121 Yuan/kW h respectively, and thus, the total additional cost of the electric power generation sector will increase by 0.244 Yuan/kW h, which would be a heavy burden to China's electric power generation sector and the forward progress of auctioning in the near future may be hindered.