China’s Provincial Carbon Emission Transfers and the Effectiveness of Mitigation Polices

Discussion Papers

No.775

by Yuning Gao, Meng Li, Bo Meng, Jinjun Xue

March 2020

ABSTRACT

The complexity of shared emissions responsibility for carbon transfers in various regions of China has further raised additional challenges for energy savings and carbon mitigation efforts. This paper establishes an extended provincial input-output (IO) model for each province to calculate carbon emissions based on production, consumption, and transfers from 2005 through 2015, and examines whether carbon mitigation policies can effectively promote energy conservation and emissions reduction in the various provinces. The empirical analysis established that: (1) an increase in the implementation strength of mitigation policy can effectively reduce production-based carbon emissions amongst the different provinces; (2) stricter mitigation policy increases the possibility that a province will transfer more of their emissions to other areas, thus causing a net emissions outflow; and (3) subsequent policy enforcement will weaken once mitigation goals are accomplished. Therefore, this paper repudiates the accepted belief that mitigation policy effectively controls carbon emissions, especially for production-based emissions. More refined policy design and supplementation is needed when considering consumption-based emissions and related carbon transfers.

Keywords: Carbon Emission, Carbon Transfer, Mandatory Mitigation Target, Input-Output Analysis, Chinese economy

JEL classification: Q54, Q58, C67, C54

©2020 by Institute of Developing Economies, JETRO and the Institute of Contemporary China Studies, Tsinghua University. No part of this publication may be reproduced without the prior permission of the IDE-JETRO and the Institute of Contemporary China Studies, Tsinghua University.