ABSTRACT
This chapter examines the economic and carbon impacts on China caused by the carbon policy based on the Nationally Determined Contributions (NDCs) of China and other major countries. The following two scenarios are investigated using a dynamic computable general equilibrium model which incorporates energy substitution (GDyn-E): China’s NDC scenario, in which China alone achieves its carbon peak-out target in 2030; and the Paris Agreement scenario, in which major countries including China achieve their NDCs. The results show that China’s output of coal, gas, and electricity decreases significantly but China’s imports of coal and gas increase. These results are likely to be related to the degree of carbon and capital intensity in China’s energy sectors. In China’s electricity sector, substitution of domestic energy for imported energy and substitution of coal for non-coal energy and capital will occur. A sensitivity analysis suggests that the economic burden can be reduced if substitution between coal and non-coal energy is increased. As a political implication, China needs to take the initiative and comply with its NDC in order for the international society to cooperate with carbon reduction. Adverse impact on China’s domestic production will be smaller by doing so.
