What are the impacts of the carbon peaking and carbon neutrality target constraints on China?s economy?

The carbon peaking target (CPT) and carbon neutrality target (CNT) will force the low-carbon transformation of China's economy. However, few studies have evaluated the economic impacts of the CPT and CNT constraints in the context of China's current carbon target policies. Based on the analytical general equilibrium model, this study assesses the impacts of the CPT and CNT constraints on China's economy. The results are shown as follows. First, the CPT and CNT constraints will tighten the high-carbon goods production sector but not hinder the sustained growth of the low-carbon goods production sector, thereby forcing China's industrial structure to transform into a low-carbon direction. In the scenario of achieving the CPT, the output growth rate of the high-carbon goods production sector will drop by 0.03%, while that of the low-carbon goods production sector will rise by 0.14%, relative to the baseline. Second, under the CPT and CNT constraints, some labor and energy inputs in the high-carbon goods production sector will flow into the low-carbon goods production sector, forming the crowding-out effect. Third, carbon target constraints will force the high-carbon goods production sector to transform from energy and labor-intensive to capital and technology-intensive. Fourth, the CPT and CNT con-straints will negatively affect households' consumption. Fifth, under the carbon target constraints, the growth rate of carbon emissions price shows a rising trend, while that of labor and energy prices shows a declining trend. These findings suggest that the government should make full use of the forced mechanism of the CPT and CNT constraints to promote the transformation and upgrading of industrial and energy structures. Meanwhile, the government should also be highly vigilant against the risk of an excessive slowdown in the high-carbon goods production sector under carbon target constraints.

Automated summary

The carbon peaking target (CPT) and carbon neutrality target (CNT) will drive China's economy towards low-carbon transformation. This study evaluates the economic impacts of these targets using an analytical general equilibrium model. The results show that the CPT and CNT constraints will tighten high-carbon goods production but not hinder the growth of low-carbon goods production, leading to a shift in China's industrial structure towards low-carbon direction. The constraints will also negatively affect households' consumption and result in changes in carbon emissions, labor, and energy prices.