An Empirical Study on the Shadow Price of Carbon Dioxide Emissions in China’s Industry

Abstract

The Paris Conference holds great significance in terms of establishing a legally binding and global agreement on climate change with the aim of keeping global warming below 2ºC above preindustrial levels [1]. However, as one of the largest economies in the world, China is the biggest emitter worthy of the name and its annual growth of emissions has been more than the sum of North America and Europe [2]. As a responsible country, China has committed to reducing CO 2 emissions per unit of GDP (i.e., carbon intensity) by 40-45% by 2020 compared to 2005 [3]. Furthermore, in the Paris Climate Conference, China's government pledged to peak its CO 2 emissions no later than 2030 [4] and further reduce carbon intensity by 60-65% of the 2005 level [5, 6]. Determining how large the economic sacrifice will be for achieving the upper goals has attracted increasing attention in recent literature [7,