Implications for Provincial Economies of Meeting China's NDC Through an Emission Trading Scheme: A Regional CGE Modeling Analysis

62 Pages Posted: 6 Aug 2019

See all articles by Jun Pang

Jun Pang

Renmin University of China - School of Business

Govinda R. Timilsina

World Bank - Development Research Group (DECRG)

Date Written: June 21, 2019

Abstract

This study analyzes the potential impacts of a national emission trading scheme on provincial economies in China of meeting China's emission reduction pledges, the Nationally Determined Contributions announced under the Paris Agreement. The study developed a multiregional, multisectoral, recursive-dynamic computable general equilibrium model and calibrated it with the latest provincial-level social accounting matrices (2012). The study shows that meeting China's Nationally Determined Contributions through an emission trading scheme would reduce almost 30 percent of the emission reduction from the business as usual scenario in 2030. If the baseline is corrected based on information from a bottom-up energy sector model, TIMES, the required reduction of emissions from the baseline in 2030 drops by half, to 15 percent. At the national level, the emission trading scheme would cause a 1.2 to 1.5 percent reduction in gross domestic product from the business as usual scenario in 2030. If the baseline is corrected, the impact on gross domestic product drops by two-thirds. The emission trading scheme would cause some provincial economies to gain and others to lose. The economic impacts are highly sensitive to the allowance allocation rules. Not only the magnitudes, but also the directions of the economic impacts alter when the allocation rules change. The provinces that rely on coal mining or coal-intensive manufacturing industries are found to experience relatively larger economic losses irrespective of the allowance allocation rules.

Keywords: Energy and Environment, Energy Demand, Energy and Mining, Oil Refining & Gas Industry, Public Sector Administrative & Civil Service Reform, Public Sector Administrative and Civil Service Reform, De Facto Governments, Democratic Government, Energy Policies & Economics, Employment and Shared Growth

Suggested Citation

Pang, Jun and Timilsina, Govinda R., Implications for Provincial Economies of Meeting China's NDC Through an Emission Trading Scheme: A Regional CGE Modeling Analysis (June 21, 2019). World Bank Policy Research Working Paper No. 8909. Available at SSRN: https://ssrn.com/abstract=3430520

Jun Pang (Contact Author)

Renmin University of China - School of Business ( email )

Beijing, 100872
China

Govinda R. Timilsina

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

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