The impact of a national carbon price on China

As the world No.1 emitter of carbon dioxide (CO2), China has made up its mind to act on climate change. After trials in six pilot regions- Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, and Chongqing- a nationwide ETS has been established and implemented in line with the Thirteenth Five-Year Plan period (2016-2020). This paper simulates the effect of a national ETS in China using GTAP 9.1 database and a revised GTAP-E model. The simulation results show that the ETS is very effective in emissions reduction but will cause a mild economic contraction. At the sectoral level, the energy and resource sectors and energy intensive sectors are to be hit hard while most other sectors are affected negatively but insignificantly.