Using the Improved CGE Model to Assess the Impact of Energy Structure Changes on Macroeconomics and the Carbon Market: An Application to China

Abstract

ABSTRACT A reasonable energy structure can secure the orderly development of the economy and effectively control carbon emissions. This paper builds a CGE (Computable General Equilibrium) model that incorporates the carbon market module, uses 2012 as a base period, and uses carbon prices and energy investments as starting points to simulate and assess China’s impact on macroeconomics and carbon markets under three scenarios. The results show that a reasonable energy structure has a positive impact on macroeconomics, and macroeconomic indicators under the three scenarios show an increasing trend compared with 2012. The comparison of economic indicators under the different scenarios shows that the expected energy structure of the 12th Five-Year Plan is the most judicious among the three scenarios and can produce greater economic benefits with lower energy investments. The study concluded that carbon market spending as a percentage of GDP is the most appropriate indicator for analyzing the relationship between carbon prices and carbon dioxide emissions. Our analysis of the indicators found that the higher the carbon price, the smaller the carbon dioxide emissions, and the lower the carbon price, the greater the carbon dioxide emissions. This article will help provide a reference for China’s future energy structure adjustment.