The impacts of staying under 1.5 and 2.0 degree of global warming on China's economy

Abstract

Global consensus has been achieved after Paris Agreement that the average global temperature rise must be controlled below 2 °C compared to the pre-industrial levels, and great efforts should be made to limit temperature rise within 1.5 °C. The study explores the impacts of staying under 1.5 and 2.0 degree of global warming on China’s Economy. To achieve the urgent targets, the limited global carbon budget needs to be properly managed. The study firstly investigates the allocation of global carbon budget to nations according to three equitable distribution principles. It shows that if considering equal per capita entitlement, China will be allocated with the smallest amount of carbon budget among the three allocation schemes. Whatever the allocation scheme is, China’s Nationally Determined Contribution (NDC) is far from achieving 2.0-degree target. China’s carbon budget consumption during 2010 to 2015 is almost 1/3 to 1/5 of its cumulative budget before 2050, which makes its mitigation pressure unprecedentedly high in the following decades. As a world factory, China’s virtual emission embodied in trade takes a large proportion in its total emission. The study also explores the impact brought by trade by analyzing the historical embodied GHGs from 2000 to 2009 and estimating embodied CO2 emission from 2015 to 2050. It shows that although it accounts for nearly 15% of its emission in China in 2009, net embodied GHGs emissions export would decrease greatly in the future, and there exists a possibility that China may become a net emission import after 2070. Since nations would gradually achieve carbon-neutral around 2060, emissions embodied in trade will become less and less. After showing that the impacts brought by trade would be minor on China’s carbon emission budget, the study established a new integrated economic, energy and environmental dynamic computable general equilibrium (CGE) model (C_TDCGE) for China’s climate change policy analysis. C_TDCGE model consists of 41 sectors and uses 2015 as the base year. The simulation period is from 2015 to 2050 based on a recursive dynamic mechanism. Using C_TDCGE model, this study analyzed and compared the economic impacts of different mitigation policies and targets for China’s climate policy-making based on current international climate negotiation process. The results show that there exists a relatively low-cost emission reduction space for China to achieve its NDC target. While 2.0-degree target would be the critical state of cost control, further emission reduction such as 1.5-degree target that exceeds this scope will lead to a sharp increase in mitigation cost. When considering sectoral approaches for mitigation, the priority should be given to metal smelting、chemical and non-metallic product industries that have great emission reduction potentials and relatively lower abatement costs.