The economic impact of China's INDC: Distinguishing the roles of the renewable energy quota and the carbon market

This study contributes to the existing literature on economic impacts assessment of China's Intended Nationally Determined Contributions (INDC) by 2030. A dynamic Computable General Equilibrium (CGE) model of China that incorporates the technological details of the electricity sector is used in this study. Two main policy choices, including the renewable quota and the carbon market, are modeled to distinguish different pathways to INDC targets. Results show several important findings. First, the total economic cost required to achieve China's INDC targets ranges from 0.11% to 0.43% of GDP by 2030. Second, energy sectors such as the coal mining and electric power sectors are the most affected by China's INDC in terms of both sectoral production and price. This study further indicates that the implementation of a national carbon market is efficient in reducing the compliance costs of INDC targets, while the deployment of renewable power helps to create employment opportunities and reduce permit prices in the carbon market. In addition, the results of a cost-benefit analysis suggest that the hidden health benefits of China's INDC can offset approximately 42.1-162.3% of the compliance costs, even based on the most conservative estimates.