How would an emissions trading scheme affect provincial economies in China: Insights from a computable general equilibrium model.

This paper analyzes the economic impacts of a national emissions trading scheme in 31 Chinese provinces. The emissions trading system is assumed to accomplish China's emissions reduction targets set under the Paris Climate Agreement. A multi-regional, multi-sectoral, recursive-dynamic computable general equilibrium model is developed for the analysis. The results show that the emissions trading scheme would reduce provincial CO 2 emissions by 4%–22% relative to the baseline levels in 2030. It would cause the provincial GDP to change from −4.6% to 1.8% relative to the 2030 baseline levels. The magnitudes of the impacts on provincial economies and CO 2 emissions are sensitive to initial emissions allocation rules. Some provinces that face GDP loss under one rule of emissions allocation would experience GDP gains under the other rules, and vice versa. However, emissions-intensive provincial economies—Neimenggu, Ningxia, Shanxi, and Shaanxi—are found to experience higher GDP loss irrespective of the allowance allocation rules. Meanwhile, Fujian, Guangdong, Guangxi, and Liaoning are found to experience higher GDP under all the rules of allowances allocation. [Display omitted] • National emission trading is the main pricing instrument for meeting China's NDC. • Multi-regional, multi-sector, dynamic CGE model used for the analysis. • Some provinces gain whereas most other lose under the emission trading. • Emission intensive industries suffer the most from the emission trading. • Economic impacts depend on allowance allocation rules. [ABSTRACT FROM AUTHOR]