Dual Transition of Energy and Industrial Structure under the Carbon Peaking and Neutrality Goals
In the past decade,China's industrial structure has been transitioning toward an environmental-friendly direction.Various forms of green energy,such as wind and solar power,have been widely adopted.As a result,China's GDP growth rate has exceeded the growth rate of energy consumption,which in turn has exceeded the growth rate of CO2 emission.By constructing a multi-sector dynamic general equilibrium model with endogenous energy and industrial structure and calibrating it to Chinese data,this study investigates the interaction between energy and industrial upgrading and their relations with CO2 emission.In the theory proposed in this study,the transition of the energy structure is both a driver and an outcome of industrial structural transformation.Technology progress in the green energy sector changes the production costs across different industries,accelerating the upgrade toward a low-carbon industry.Along with changes in industrial structure,economic activities shift the energy demand from manufacturing to the service sector,speeding up the transition to a low-carbon energy structure.Throughout the process of economic growth,energy and industrial structures evolve endogenously and dynamically at different stages,contributing to China's economic growth.We calibrate the model to match various important moments of the Chinese economy from 2009 to 2020,including GDP growth rate,saving rate,energy structure,industrial structure,and input-output linkage.We derive a first-order approximation to decompose the driving force of industrial structure transformation,energy structure transformation,and the growing CO2 emissions trend.Our work draws three conclusions.First,the transition of industrial structure contributes about 11%of the transition of energy structure.The contribution to each component,which includes coal,oil,and green energy,has reached 11%,23%,and 1%,respectively.Second,the changing price of energy inputs explains about 4%of the transformation process from the manufacturing to the service sector.Third,from 2009 to 2020,industrial structural transformation drove changes in energy structure and significantly reduced CO2 emissions.During this period,the cumulative reduction in CO2 emissions due to industrial structural transformation was approximately 1 billion tons,which is equivalent to 10%of China's CO2 emissions in 2020.Then,we use the calibrated model to predict China's industrial and energy structure from 2020 to 2080.First,the declining rate in the share of China's manufacturing sector will slow down,and we predict a long-run share of the manufacturing sector around 30%.Second,the share of petroleum and natural gas in China's energy structure exhibits an inverted U-shaped evolution.The first stage mainly involves the substitution of petroleum and natural gas for coal resources,while the second stage features green energy replacing petroleum and natural gas resources.In particular,we try to predict whether China will achieve its"carbon peaking and neutrality goals"that were committed by the Chinese government to strive for carbon peaking by 2030 and make efforts to achieve carbon neutrality by 2060.Our simulation analysis reveals that China's CO2 emissions will peak from 2029 to 2031,with a peaking value of approximately 12.1 billion tons.However,by 2060,China's CO2 emissions will still be around 7.8 billion tons,making it a challenging task to achieve"carbon neutrality by 2060."To achieve carbon neutrality by 2060,we assume that the government can start imposing carbon taxes in 2030.Then,we used the calibrated model to solve for the carbon taxation plan that maximizes residents'lifetime welfare under the carbon neutrality goal.We find that the optimal tax rate rises rapidly with economic growth and exhibits significant stage dependency,implying that a lower carbon tax rate should be implemented in the early stages of development.This is because lower carbon tax rates result in higher capital returns,which are conducive to long-term capital accumulation,industrial upgrading,and economic growth.In conclusion,this study sheds light on the interactions between industrial and energy structures by developing a quantitative dynamic general equilibrium framework with endogenous energy and industrial structure.The conclusions of this study provide direct suggestions for the co-development of China's energy-economic system under the carbon peaking and neutrality goals.
Carbon Peaking and Neutrality GoalsEnergy StructureIndustrial StructureCarbon TaxDevelopment Stage