Distributive policy

A comprehensive set of macroeconomic policy measures for the implementation of China’s climate change mitigation strategy

A comprehensive set of macroeconomic policy measures for the implementation of China’s climate change mitigation strategy

Author/Editor:

John Castle; Wenji Chen; Florence Jaumotte; Karlygash Zhunussova



Publication date:

July 15, 2022

Electronic access:

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Disclaimer: IMF Working Papers describe ongoing research by the author(s) and are published to elicit comment and encourage debate. The opinions expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Board of Directors, or IMF management.


Summary:

This paper outlines ways for China to meet its climate goals while achieving high-quality, balanced, inclusive and green growth. Using a dynamic computable general equilibrium model calibrated for China, several scenarios are considered that incorporate a sequence of layered policies: (i) anticipated mitigation with an earlier emissions peak, (ii) electricity market and (iii) economic rebalancing. The results underline that these policies can contribute significantly to the success of the climate strategy as a whole, in particular by lowering the shadow price of carbon as well as the associated mitigation costs. The distribution analysis offers proposals to reduce the impact on vulnerable households.