Simulating the cost-effectiveness of China's green transition based on emission reduction targets during the 12th five-year plan period

Abstract

The period of the 12th five-year plan has been a critical one for China; it has led to comprehensive development and the emergence of a moderately prosperous society. During that period, reforms in the mode of China's economic development and a development strategy for green transformation have been implemented; constraints relating to resources and the environment have been overcome. Green transformation incurs certain costs in the short term; however, in the long term, it can create new requirements to boost economic development, thereby generating substantial environmental and social benefits. In this study, we assessed the costs and benefits of a green transformation development strategy based on pollution reduction targets. Viewing the pollution reduction targets of the 12th five-year plan as constraints, we applied a general equilibrium analysis system for environment to simulate interactions between environmental protection and economic development. Our simulation results indicated that the cost of achieving a green transition driven by total emission reduction was 595.7 billion CNY; reduction of pollutant emissions generated an environmental benefit of 843.7 billion CNY. Total emission reduction targets created positive structural benefits and promoted a structure for production, consumption, trade, and factor demand that prompted a shift from polluting to clean industries; there were significant decreases in the proportion of high-polluting industries and substantial increases in clean industries. We conclude that growth in the demand for pollution abatement can propel the development of green industry and create new economic growth. In addition, with the rise of marginal abatement costs emission reduction would be more dependent on structural adjustment.