Synergistic effect of carbon ETS and carbon tax under China's peak emission target: A dynamic CGE analysis

Global warming resulting from greenhouse gas emissions poses threats to humankind and has become a worldwide issue. As the top CO2 emitter in the world, China has committed to achieving its carbon emission peak by no later than 2030; in this context, how to best use and apply carbon emission reduction policy is particularly critical. By constructing a dynamic computable general equilibrium (CGE) model, we first examine a pure ETS included only the electricity sector in 2021, and the eight sectors starting in 2022, considering a declining carbon intensity rate of 4.5% and a higher rate of 4.8%. With the carbon intensity rates of 4.3% and 4.5%,we further evaluate two-hybrid systems of the carbon tax and carbon ETS, where the carbon tax of 10 yuan per ton is the starting levied rate in 2022 and increases at 4 yuan per ton year by year. The results proved that hybrid emission reduction policy can help reach a carbon emissions peak before 2030 and do so at a lower economic cost compared to the effect of pure carbon ETS. Besides, the coordinated use of a carbon tax and a carbon ETS can promote optimization of energy consumption structures and accelerate the decline of energy intensity and carbon intensity; this can contribute to curbing the growth of total energy consumption and total carbon emissions.

Automated summary

This study examines the impact of different carbon emission reduction policies on achieving carbon emissions peak by using a dynamic computable general equilibrium model. The results show that a hybrid system of carbon tax and carbon ETS can help achieve the peak at a lower economic cost and promote optimization of energy consumption structures.