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Impacts of carbon pricing in reducing the carbon intensity of China's GDP (English)

In contributing to global climate change mitigation efforts as agreed in Paris in 2015, China has set a target of reducing the carbon dioxide intensity of gross domestic product by 60-65 percent in 2030 compared with 2005 levels. Using a dynamic computable general equilibrium model of China, this study analyzes the economic and greenhouse gas impacts of meeting those targets through carbon pricing. The study finds that the trajectory of carbon prices to achieve the target depends on several factors, including how the carbon price changes over time and how carbon revenue is recycled to the economy. The study finds that carbon pricing that starts at a lower rate and gradually rises until it achieves the intensity target would be more efficient than a carbon price that remains constant over time. Using carbon revenue to cut existing distortionary taxes reduces the impact on the growth of gross domestic product relative to lump-sum redistribution. Recycling carbon revenue through subsidies to renewables and other low-carbon energy sources also can meet the targets, but the impact on the growth of gross domestic product is larger than with the other policies considered.

Details

  • Author

    Cao,Jing, Ho,Mun-Sing, Timilsina,Govinda R.

  • Document Date

    2016/06/29

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS7735

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    China,

  • Region

    East Asia and Pacific,

  • Disclosure Date

    2016/06/29

  • Disclosure Status

    Disclosed

  • Doc Name

    Impacts of carbon pricing in reducing the carbon intensity of China's GDP

  • Keywords

    carbon price;base case;united nations framework convention on climate change;carbon pricing;Electricity;co2 emission;dynamic computable general equilibrium;improvements in energy efficiency;global climate change mitigation;Environment & Energy;energy information administration;reduction in energy consumption;lump sum to households;rate of productivity growth;carbon revenue;coal use;carbon tax;gas;total energy consumption;capital income tax;lump sum rebate;carbon tax rate;lump sum transfer;impact of policy;fossil energy use;working age population;development research group;carbon tax revenue;capital stock;carbon emission reduction;Climate Change Policy;share of work;household saving rate;relative price change;improvement in capital;wholesale generation market;electric power sector;basket of good;current account deficit;fossil fuel price;factor of production;stock of debt;current account surplus;stock of capital;emission trading scheme;carbon trading programs;tax on coal;cost of transmission;total electricity generation;energy intensive industries;reduction in emission;price of coal;elasticity of substitution;consumption of electricity;consumption of coal;crude oil price;price of energy;tax on value;household demand function;total factor productivity;high energy price;price of commodities;high tax rate;world oil price;price of labor;dividend payout rate;terms of trade;current account balance;carbon tax price;total energy demand;impact on price;electricity sector;

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Citation

Cao,Jing Ho,Mun-Sing Timilsina,Govinda R.

Impacts of carbon pricing in reducing the carbon intensity of China's GDP (English). Policy Research working paper,no. WPS 7735,Paper is funded by the Knowledge for Change Program (KCP) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/784211467205076302/Impacts-of-carbon-pricing-in-reducing-the-carbon-intensity-of-Chinas-GDP