A general equilibrium assessment of economic impacts of provincial unbalanced carbon intensity targets in China

Abstract

It is necessary to measure the economic impacts of the attempts to achieve China’s carbon emission intensity reduction target. Consequently, this study analyzes the economic impacts of the differentiated CO2 intensity targets between Guangxi Province and the rest of China. An improved two-region computable general equilibrium model with eight scenarios is used. Our results show that different CO2 intensity targets in different regions will affect Guangxi’s GDP, carbon price, welfare, and output. The highest reduction target of 75% in the P75C65 scenario in Guangxi will lead to a cost of 0.42% in per capita GDP loss, 0.51% of welfare loss, and a carbon price of 49.4 USD/t. In addition, the output of the energy-intensive sectors is most vulnerable to carbon mitigation policy. The two mechanisms that affect economic indicators are price and scale effects. Under the P75C65 scenario, sectors such as vehicle manufacturing are winners and are affected by both price and scale effects in Guangxi, with export, provincial outflow, domestic supply, and output decreasing by 1.64%, 0.88%, 0.93%, and 0.93%, respectively. In contrast, sectors such as agriculture are losers and are affected by the scale effect, with these four indicators increasing by 1.25%, 0.97%, 0.59%, and 0.73%, respectively. These findings provide valuable insights for policy makers who wish to allocate provincial reduction targets and achieve co-benefits between the economy and the environment.