The Pathway to China’s Carbon Neutrality Based on an Endogenous Technology CGE Model

Abstract

Global warming resulting from greenhouse gas emissions has been a worldwide issue facing humanity. Simultaneously, governments have the challenging task of striking a judicious balance between increased economic growth and decreased carbon emissions. Based on the energy-environment-economy triple coupling (3E-CGE) model, we endogenously integrate climate-friendly technologies into the model’s analysis framework through logic curves and refine and modify the CGE model’s energy use and carbon emission modules. We conduct a scenario simulation and sensitivity analysis on carbon tax, carbon-trading, and climate-friendly technological progress, respectively. The results reveal that carbon tax and carbon trading contribute to reducing carbon emissions in the short-term but achieving the goals of peak carbon and carbon neutrality will cause the collapse of the economic system. In the long-term, climate-friendly technologies are key to achieving the dual carbon goal; the development of such technologies can also stimulate economic development. The best path for China to achieve its dual carbon goals and economic development in the next 40 years involves effectively combining the carbon tax, carbon trading, and a climate-friendly technological progress. Specifically, China can begin trading carbon in high-emissions industries then impose industry-wide carbon taxes.