Analysis of the impacts of carbon neutral policy portfolios on the economy, environment, and residents' welfare based on computable general equilibrium models

Abstract

The efficacy of the synergistic interplay of various programs about energy efficiency and emission reduction in China's endeavor to achieve carbon peaking and carbon neutrality remains to be determined. This research constructed a computable general equilibrium (CGE) model to examine the economic, environmental, social, and energy consequences of various policy combinations. Using data from the 2018 input-output table of China, we create 21 industry sectors and examine the combined impacts of different carbon policies. Our findings indicate that the effects of carbon emission reduction are more favorable when multiple carbon-neutral policies are implemented together, compared to the impact of a single policy. Among the various combinations of policies examined, the combination of feed-in tariff subsidy policy (FIT), renewable energy quota policy (RPS), carbon trading, carbon tax, and carbon capture, utilization, and sequestration (CCUS) technology proves to be the most effective. The study predicts that by 2060, this combination of policies could lead to a reduction of 32.5% in carbon dioxide emissions. At the same time, it was discovered that a combination of lower-intensity renewable energy quotas, carbon trading, carbon taxes, and higher-intensity subsidies for carbon capture, utilization, and storage (CCUS) technologies, the synergy indicator θ exceeds 1, indicating a more stable economy; When the carbon tax policy is more robust, and the remaining three policies are more minor, carbon emissions fall the most and are the most ecologically beneficial. Imposing excessively high renewable energy quotas while maintaining the same level of technology and substitutability between fossil fuels and electric energy sources will result in economic instability afterward. Therefore, we suggest that to attain balanced growth of the environment, society, and economy, the government should increase the function of policy combinations and balance several objectives.