Current relationship between coal consumption and the economic development and China's future carbon mitigation policies

Abstract

China is the largest emitter worldwide, and coal consumption contributes the most. So the key to emission mitigation is to reduce coal consumption. The paper applies panel data during 1998–2017 to analyze the relationship between coal consumption and economic development. The results indicate that the relationship is now weakening, and find evidence of inter-provincial relocation of the coal-intensive industries. The reduction of the marginal contribution provides the possibility for China's economic emission mitigation. Then, the paper applies a dynamic recursive computable general equilibrium model to simulate carbon mitigation policies during 2017–2030 at the same emission reduction level, including coal capacity cut, Emission Trading Scheme (ETS), carbon tax with ETS, and resource tax. The results show that different policies have specific advantages: coal capacity cut reduces coal consumption the most; ETS significantly improves the share of renewable energy; carbon tax with ETS could optimize economic structure; resource tax is good at protecting the economic aggregate. Based on these conclusions, specific policy implications are proposed, such as measurements of increasing energy cost and collaborative regional environmental regulation.