A Comprehensive Package of Macroeconomic Policy Measures for Implementing China's Climate Mitigation Strategy

Abstract

This paper presents ways for China to achieve its climate goals while also attain high-quality growth—growth that is balanced, inclusive, and green. Using a dynamic computable general equilibrium model that is calibrated to China, multiple scenarios are considered that incorporate a sequence of layered policies: (i) frontloading mitigation with an earlier emissions peak, (ii) power market reforms, and (iii) economic rebalancing. The results highlight that these policies can significantly contribute to the success of the climate strategy overall, including by lowering the shadow price of carbon as well as the associated mitigation costs. Distribution analysis offers proposals to lessen the impact on vulnerable households.

Keywords: Chinese economy, climate policy, carbon neutrality, rebalancing, Computable General Equilibrium model

JEL Classification: O53, Q54, O14, D58