Economic effects of command-and-control abatement policies under China's 2030 carbon emission goal

Abstract

To mitigate greenhouse gas emissions, China has committed to reducing its national carbon emission intensity, which is a measure of carbon dioxide produced per unit of gross domestic product (GDP), by 65% by 2030 compared with the level in 2005. The government is pursuing corresponding abatement initiatives to achieve this goal. Coupling the physical data of sectoral energy inputs and emissions with a mixed exogenous/endogenous input-output model, this study first projected the carbon emissions in 2030 under a business-as-usual baseline and then investigated the potential economic effects of the "command-and-control" approach for reducing carbon emissions by limiting production capacity and strengthening forest carbon sink management. Three carbon abatement scenarios were evaluated from the perspectives of social equity, abatement efficiency, and forest carbon sinks. Our results indicated that, under the 2030 carbon emission goal, the GDP in China would decline by 17.17-41.26 trillion yuan (equivalent to a marginal abatement cost of 2315-5387 yuan per ton of carbon dioxide reduction), depending on different policy initiatives. The policy of carbon reduction for high-emission sectors only is more cost-effective and economically efficient and has resulted in fewer negative economic impacts than the policy of requiring all economic sectors to do so. Asking high-carbon emission industries to undertake carbon abatement can further reduce national carbon emission intensity. Additionally, promoting forest carbon sinks as an abatement initiative also demonstrates substantial economic benefits for society.

Keywords: Carbon reduction target; Command-and-control policy; Economic effect; Mixed exogenous/endogenous input–output model.