Low-carbon technology diffusion and economic growth of China: an evolutionary general equilibrium framework

Abstract

The thorough transition of energy system is required to achieve the Paris Agreement goal. Computable general equilibrium (CGE) models are a common tool for estimating the energy transition pathway and the impact of low-carbon policies on economic growth. However, CGE models encounter challenges on modeling diffusion of new technologies. This study proposed a novel evolutionary dynamic general equilibrium model to capture the nonlinear, path-dependent and S-shaped technology diffusion process, and examined the low-carbon transition pathway of power sector and its impact on economic growth of China. We found that imposing a moderate carbon tax and avoiding the over-reliance on coal-fired power could achieve the near-zero emissions of power sector, avoid the large economic loss and hasten the economic growth in the long term. The evolutionary framework may be useful for developing the next-generation model, particularly for simulating the diffusion of new technologies, and their structural effects on economic dynamics.