Assessing the distributional impacts of ambitious carbon pricing in China's agricultural sector

Abstract

Non-CO2 greenhouse gas emissions from the agricultural sector play an important role in the global warming process. The carbon neutrality target pledged by China accelerates the research and implementation of climate mitigation policies. This study assessed the distributional impacts of carbon pricing on the agricultural sector from a multi-regional CGE model subdividing 12 primary agricultural sectors, 15 processed food sectors and 10 groups of households. The results revealed that in an agricultural carbon tax scenario under 1.5 °C target, emission-intensive food products (red meat and dairy products) experienced rapid price increases (4.22% and 3.14%) and consumption decreases (−6.61% and − 4.30%). The poorest rural households experienced the highest losses of 2.05% in protein and 1.42% in energy due to the decline in food consumption. Regressive welfare impacts were also observed, with the loss of rural residents being 1.3 times that of urban residents. The poorest income quintile tended to suffer a larger loss due to their higher share of food expenditures and greater vulnerability to changes in food prices. Furthermore, income inequality increased under the agricultural carbon tax, and the Gini coefficient increased by 0.57% compared with the BAU scenario in 2050, especially for the northern and southwestern regions. Tax revenue recycling focusing on the poor can help to offset the negative effects by expanding their income. Overall, a carefully designed carbon policy for the agricultural sector could help reduce carbon emissions while protecting vulnerably poor people and regions.