Can technological progress abate the negative impact of low carbon policies on economic growth in China?

Weixian Wei and Jin Xu

Applied Economics, 2025, vol. 57, issue 42, 6714-6733

Abstract: Whether technological progress can provide a complementary solution that reduces the economic costs of carbon pricing policies, thereby accomplishing a win-win situation for carbon abatement and economic growth? By developing an improved multi-regional dynamic CGE model that integrates investment adjustment costs into the capital accumulation equation, this study provides a lens through which to evaluate the collective impacts of the national carbon market, carbon tax, and technology progress in China. The findings confirm the substantial potential of carbon pricing policies to curtail CO$_2$ 2 emissions, highlighting their critical role in climate change mitigation. Yet, it also exposes a trade-off, where these policies might impact GDP growth and exports, necessitating a balanced approach to policy design. The outputs of energy sectors are particularly vulnerable to carbon pricing policies, indicating a need for tailored strategies to support these industries in their transition towards sustainability. The study uncovers that the fusion of carbon pricing policies with technological progress can enhance carbon abatement efforts while softening the economic blow, illuminating a path to sustainable development that balances environmental and economic imperatives.

Date: 2025
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DOI: 10.1080/00036846.2024.2386851

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