Working Paper: CEPR ID: DP8895
Authors: Carlo Carraro; Emanuele Massetti
Abstract: This paper examines future energy and emissions scenarios in China generated by the Integrated Assessment Model WITCH. A Business-as-Usual scenario is compared with five scenarios in which Greenhouse Gases emissions are taxed, at different levels. The elasticity of China?s emissions is estimated by pooling observations from all scenarios and compared with the elasticity of emissions in OECD countries. China has a higher elasticity than the OECD for a carbon tax lower than 50$ per ton of CO2-eq. For higher taxes, emissions in OECD economies are more elastic than in China. Our best guess indicates that China would need to introduce a tax equal to about 750$ per ton of CO2-eq in 2050 to achieve the Major Economies Forum goal set for mid-century. In our preferred estimates, the discounted cost of following the 2°C trajectory is equal to 5.4% and to 2.7% of GDP in China and the OECD, respectively.
Keywords: China; Climate Change; Energy; Policy
JEL Codes: F5; Q1; Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon taxes (low) (H23) | emissions reductions (higher elasticity) (H23) |
| carbon taxes (high) (H23) | emissions reductions (lower elasticity) (Q52) |
| carbon taxes (increased) (H23) | emissions reductions (varies with tax intensity) (H23) |
| carbon tax of $750 per ton (H23) | emissions reductions (50% by 2050) (Q47) |
| cost of following 2°C trajectory (Q52) | GDP (higher for China) (O57) |