Can China afford to commit to effective carbon pricing policies?

The paper assesses how different carbon tax rates (10 and 100 yuan/tCO2) affect various Chinese industrial sectors. It finds that while a low carbon price is a safe starting point, a higher price of 100 yuan/tCO2 would significantly impact energy-intensive sectors like ferrous metals and electricity, potentially reducing GDP by 1.1% unless revenue is redistributed to stimulate consumption. The study highlights the electricity sector as the primary driver for CO2 emission reductions and suggests that targeted carbon pricing for energy-intensive sectors could be more efficient than a nationwide policy.

• A low carbon price of 10 yuan/tCO2 (approximately 1 euro/tCO2) is considered a "safe starting point" for introducing carbon pricing in China due to its minimal impact on industrial competitiveness.
• Under a high carbon price of 100 yuan/tCO2, nine industrial sectors would be significantly affected based on European Commission carbon leakage criteria, representing 13% of China's total GDP and 36.9% of its total gross export value.
• The ferrous metal production sector is identified as the most affected manufacturing sector under a 100 yuan/tCO2 tax, with a carbon cost to value-added (CtV) ratio of 16.7%.
• A carbon tax of 100 yuan/tCO2 is projected to have significant macroeconomic negative impacts, including a 1.1% reduction in GDP, a 1.13% decrease in household and government consumption, and a 1.66% drop in employment.
• The electricity and heat supply sectors are the largest contributors to CO2 emission reductions; under one scenario, they account for 476 million tons of the total 655 million ton reduction (an 11.15% decrease relative to baseline).
• Redistributing carbon tax revenue to stimulate consumption (Scenario S3) is the most effective option, resulting in positive GDP growth (0.21%) and positive employment growth (1.07%), aligning with China's 12th Five Year Plan targets.
• The model indicates that carbon pricing could help China's strategy to curb the expansion of energy-intensive sectors, as the output of energy supply sectors shrinks considerably (e.g., coal mining by -11.4%).

APA

WANG, X., LI, J. F., & ZHANG, Y. X. (2011). Can China afford to commit to effective carbon pricing policies? Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/cs-china-competitiveness-iddri-final.pdf

Chicago

WANG, Xin, Ji Feng LI, and Ya Xiong ZHANG. Can China afford to commit to effective carbon pricing policies? Climate Strategies, 2011. https://climatestrategies.org/wp-content/uploads/2014/11/cs-china-competitiveness-iddri-final.pdf.

Wikipedia

{{cite report |last1=WANG |first1=Xin |last2=LI |first2=Ji Feng |last3=ZHANG |first3=Ya Xiong |title=Can China afford to commit to effective carbon pricing policies? |publisher=Climate Strategies |date=August 2011 |url=https://climatestrategies.org/wp-content/uploads/2014/11/cs-china-competitiveness-iddri-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wang2011can, author = {WANG, Xin and LI, Ji Feng and ZHANG, Ya Xiong}, title = {{Can China afford to commit to effective carbon pricing policies?}}, institution = {Climate Strategies}, year = {2011}, month = aug, url = {https://climatestrategies.org/wp-content/uploads/2014/11/cs-china-competitiveness-iddri-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }