Carbon Emission Reduction Cost Assessment Using Multiregional Computable General Equilibrium Model: Guangdong–Hong Kong–Macao Greater Bay Area

Abstract

Carbon emissions reduction is an urgent global call to action, and for China, the nation with the largest carbon dioxide emissions, the task is especially arduous. For a country like China with many provinces and cities and unbalanced regional economic development, how to balance carbon emission reduction targets with economic development goals has become a social concern. Estimating the emission reduction costs of economic entities at all levels and reasonably allocating emission reduction tasks are the basic prerequisites for sustainable urban development. Based on an input–output (IO) table analysis of the socioeconomic data of Guangdong Province from 2017, this paper uses RAS and other data reconciliation methods to decompose various statistical data based on cities and industries. A multiregional IO table of nine cities in Guangdong Province in the Guangdong–Hong Kong–Macao Greater Bay Area (GBA) is obtained, and a multiregional computable general equilibrium (CGE) model of Guangdong Province is established. Using this model, this paper explores city-level differences in carbon emissions reduction costs while accounting for differences in economic development under industry-wide coverage. A scientific basis for the allocation of urban carbon quotas is provided, which is particularly important for the sustainable development of cities. First, the carbon emissions reduction cost (carbon price) of each city is related to the intensity of emissions reduction and the present carbon intensity, both of which are affected by cities’ industrial and trade structures. Second, under neoclassical closure conditions, carbon emissions reduction is found to have less impact on the overall gross domestic product (GDP). At the industrial level, the high-carbon sectors are the most affected, whereas the low-carbon sectors are less affected. Notably, some industries become beneficiary sectors. Under Keynesian closure conditions, carbon emissions reduction has a greater impact on overall GDP, and all cities and industries are generally affected, especially those that are currently carbon- and trade-intensive. Third, to ensure the achievement of emissions reduction targets and minimize negative economic impacts, it is determined that the direct and opportunity costs of carbon emissions reduction must be fully considered when allocating carbon allowances, and optimal solutions should be derived from the combined perspective of fairness and efficiency.