Research on the industry sequence for the expansion of China's carbon market: From the perspectives of stabilizing economic growth and employment

Abstract

Since the national carbon market in China started trading in 2021, only over 2000 enterprises in the power generation industry have participated in the trading, with a small cumulative trading volume. There is an urgent demand for market expansion. Currently, the Chinese economy is still in the recovery stage, facing significant employment pressure. In order to avoid a large negative impact of the expansion of the Chinese carbon market on the economy, key industries should be systematically included in the national carbon market. We developed a social accounting matrix (SAM) multiplier analysis based on industry grouping and consider two scenarios: first, each key industry reduces CO₂ emissions by 1 ton, and second, each key industry reduces CO₂ emissions by 1 %. For the first scenario, we calculate the marginal value added and employment impacts of carbon reduction. For the second scenario, the impact of carbon reduction on the elasticity of value added and the elasticity of employment are calculated. Industries with the higher added value and employment losses per unit of carbon reduction should be included later in China's national carbon market. The sorting results of the two scenarios can mutually corroborate each other. Our order of inclusion is different from the market's expectations, and the results are also different from previous relevant studies. On the one hand, we not only calculates the direct economic impact of key industries included in the national carbon market but also calculates the indirect and induced economic impacts. On the other hand, we used a “from the outside to the inside” planning method rather than “from the inside to the outside.” We recommend sequentially including the remaining seven key industries in the national carbon market according to the order in this article.