The Dual Effects of the Carbon Pricing Mechanism: A Balanced Path between Economic Costs and Environmental Benefits

Shuming Zhang ()
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Shuming Zhang: Guangdong Country Garden School

A chapter in Proceedings of the 2025 International Conference on Financial Innovation and Marketing Management (FIMM 2025), 2025, pp 555-563 from Springer

Abstract: Abstract Global climate governance increasingly relies on carbon pricing mechanisms to achieve emission reduction targets. As of 2024, 75 carbon pricing policies have been implemented globally, covering 24% of greenhouse gas emissions. As the largest carbon emitter, China launched its national carbon market in 2021 but still faces the challenge of balancing economic growth and low-carbon transformation. This study systematically assesses the economic and environmental effects of carbon pricing mechanisms (carbon taxes, carbon trading systems, and hybrid models) by comparing international practices (such as the EU carbon market and the Canadian carbon tax) with China’s policy framework. Hybrid mechanisms (such as the connection between China’s pilot markets and the national carbon market) can enhance policy flexibility and reduce the compliance costs of emission control enterprises. At the same time, it encourages technological innovation, such as hydrogen energy steelmaking projects. Finally, long-term decarbonization relies on technological transformation and policy coordination, such as the combination of the EU carbon market and renewable energy subsidies, to promote the average annual stable growth of wind power installed capacity. The research emphasizes the necessity of differentiated policy design (such as free quota allocation and carbon tax rebates). The above conclusion provides a feasible path for optimizing China’s carbon pricing framework and coordinating the “dual carbon” goals, highlighting the importance of cross-departmental policy coordination and risk adjustment carbon pricing mechanisms.

Keywords: Carbon Pricing Economic Effect; Environmental Effect; Policy synergy Carbon neutrality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-874-5_65

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DOI: 10.2991/978-94-6463-874-5_65

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