Reaping the Economic Benefits of Decarbonization for China

Fei Teng, Frank Jotzo*

Abstract

China needs to reduce its carbon emissions if global climate change mitigation is to succeed.Conventional economic analysis views cutting emissions as a cost, creating a collective action problem. However, decarbonization can improve productivity and provide co-benefits that accord with multiple national policy objectives. We track China’s progress in reducing the emissions intensity of the economy, and construct a macro scenario with China’s carbon emissions peaking in the 2020s. Investment in greater energy productivity and economic restructuring away from heavy industries can bring productivity gains, and decarbonization of energy supply has important co-benefits for air pollution and energy security. Combined with lower climate change risks and the likelihood that China’s actions will influence other countries, this suggests that cutting carbon emissions is not only in China’s self-interest but also in the global interest. To properly identify the true costs and benefits of climate change action requires new thinking in economic analysis.

Key words: China, climate change mitigation, co-benefits
JEL codes: O44, Q48, Q54