Regional Extension and Its Application—The Regional Economic Implications of Carbon Neutrality in China

Abstract

We examine the regional economic consequences of the Chinese central government’s proposal to limit China’s peak carbon emissions before 2030 and to achieve carbon neutrality by 2060. This is done in two stages. First, we draw on detailed simulations at the national level of the economic consequences of China’s net zero transition plan. These simulations are discussed in Chap. 13 herein (see Feng et al. in CHINAGEM-E: an energy and emissions extension of CHINAGEM—and its application in the context of carbon neutrality in China. Springer, 2023). Second, we develop a top-down regional model of the Chinese economy that distinguishes 31 regions. By inputting to this regional model the national results from the simulations reported in (Feng et al. in CHINAGEM-E: an energy and emissions extension of CHINAGEM—and its application in the context of carbon neutrality in China. Springer, 2023), we are able to trace the economic consequences of China’s net zero plan for 31 regions.

Appendices

Appendix 1: Core Equations, Variables, Coefficients and Parameters of the Regional Model

1.1 Equations

$$\begin{aligned} {\text{TOTSUPREG}}_{{\text{i,s,r}}} \times x0CSR_{i,s,r} & = \sum\nolimits_{{{\text{g}} \in {\text{REG}}}} {{\text{[SHIN}}_{{\text{i,s,r,g}}} \, \times {\text{ TOTDEMREG}}_{{\text{i,s,g}}} {]}} \\ & \quad \times demCSR_{i,s,g} \\ & \quad\quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.1)

$$\begin{aligned} & {\text{TOTDEMREG}}_{{\text{i,s,d}}} \times demCSR_{i,s,d} \\ & = \sum\nolimits_{{{\text{j}} \in {\text{IND}}}} {{\text{[REGSHR1}}_{{\text{j,d}}} \times {\text{BAS1}}_{{\text{i,s,j}}} {]} \times x1r_{i,s,j,d}^{{}} } \\ & \quad \sum\nolimits_{{{\text{j}} \in {\text{IND}}}} {{\text{[REGSHR2}}_{{\text{j,d}}} \times {\text{BAS2}}_{{\text{i,s,j}}} {]}} \, \times x2r_{i,s,j,d}^{{}} \\ & \quad + {\text{[REGSHR3}}_{{\text{i,s,d}}} \times {\text{BAS3}}_{{\text{i,s}}} {]} \times x3r_{i,s,d} \\ & \quad + {\text{[REGSHR5}}_{{\text{i,s,d}}} \times {\text{BAS5}}_{{\text{i,s}}} {]} \times x5r_{i,s,d} \\ & \quad + {\text{[SRCDOM}}_{{\text{s}}} \times {100]} \times \Delta {\text{X6R}}_{i,s,d} \\ & \quad + {\text{[SRCDOM}}_{{\text{s}}} \times {\text{REGSHR4}}_{{\text{i,d}}} \times {\text{BAS4}}_{{\text{i}}} {]} \times x4r_{i,d} \\ & \quad + [{\text{SRCDOM}}_{{\text{s}}} \times {\text{DMCR}}_{{\text{i,d}}} ] \times xmar_{i,d} \\ & \quad\quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.2)

$$\begin{aligned} z_{j,r} & = z_{j}^{(C)} { + }\sum\nolimits_{i \in COM} {{\text{SHCJ}}_{{\text{i,j}}} } \\ & \quad \times \left[ {x0CSR_{i,dom,r} - \sum\nolimits_{g \in REG} {{\text{REGSHR}}1_{j,g} \times x0CSR_{i,dom,g} } } \right] \\ & \quad\quad \quad \quad \left( {j \in {\text{IND}},r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.3)

$$\begin{aligned} x1r_{i,s,j,d}^{{}} \, & = x1csi_{i,s,j}^{(C)} { + }z_{j,d} \\ & \quad - \sum\nolimits_{k \in REG} {{\text{REGSHR1}}}_{j,k} \times z_{j,k} \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},j \in {\text{IND}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.4)

$$\begin{aligned} x2r_{i,s,j,d}^{{}} \, & = x2csi_{i,s,j}^{(C)} { + }z_{j,d} \\ & \quad - \sum\nolimits_{k \in REG} {{\text{REGSHR2}}_{{\text{j,k}}} \times z_{j,k} } \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},j \in {\text{IND}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.5)

$$\begin{aligned} x3r_{i,s,d} \, & = x3_{i,s}^{(C)} { + }{\kern 1pt} yr_{d} \\ & \quad - \sum\nolimits_{{{\text{k}} \in {\text{REG}}}} {{\text{REGSHR3}}_{{\text{i,s,k}}} \times yr_{k} } \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.6)

$$yr_{r} = y^{(C)} { + }empr_{r} - emp^{(C)} \quad\quad \quad \quad \left( {r \in {\text{REG}}} \right)$$

(14.7)

$$\begin{aligned} x4r_{i,d} & = x4_{i}^{(C)} \, + \, reg4_{i,d} \\ & \quad - \sum\nolimits_{{{\text{k}} \in {\text{REG}}}} {{\text{REGSHR4}}_{{\text{i,k}}} \times reg4_{i,k} } \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.8)

$$\begin{aligned} x5r_{i,s,d} & = x5_{i,s}^{(C)} + reg5_{i,s,d} \\ & \quad - \sum\nolimits_{k \in REG} {{\text{REGSHR5}}_{{\text{i,s,k}}} \times reg5_{i,s,k} } \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},d \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.9)

$$\begin{aligned} \Delta {\text{X6R}}_{{\text{i,s,r}}} & {\text{ = REGSHR6}}_{{\text{i,s,r}}} \times \, \Delta {\text{X6}}_{{\text{i,s}}}^{{\text{(C)}}} \\ & \quad\quad \quad \quad \left( {i \in {\text{COM}},s \in {\text{SRC}},r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.10)

$$grpfc_{r} = \sum\nolimits_{{{\text{j}} \in {\text{IND}}}} {{\text{VASHJ}}_{{\text{j,r}}} \, \times \, z_{j,r} } \quad \left( {r \in {\text{REG}}} \right)$$

(14.11)

$$\begin{aligned} grpmp_{r} \, & = gdpreal^{(C)} { + }grpfc_{r} \\ & \quad - \sum\nolimits_{{{\text{k}} \in {\text{REG}}}} {{\text{VASHR}}_{{\text{k}}} } \times grpfc_{k} \\ & \quad\quad \quad \quad \left( {r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.12)

$$\begin{aligned} empr_{r} \, & = emp^{(C)} { + }relemp_{r} \\ & \quad - \sum\nolimits_{{{\text{k}} \in {\text{REG}}}} {{\text{LABSHR}}_{{\text{k}}} \, \times \, relemp_{k} } \\ & \quad\quad \quad \quad \left( {r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.13)

$$\begin{aligned} relemp_{r} \, & = \sum\nolimits_{j \in IND} {{\text{LABSHJ}}_{{\text{j,r}}} } \\ & \quad \times { (}labind_{j}^{(C)} { + }z_{j,r} - z_{j}^{(C)} {)} \\ & \quad\quad \quad \quad \left( {r \in {\text{REG}}} \right) \\ \end{aligned}$$

(14.14)

1.2 Set Definitions

IND::

{j1 – j159} Set of all industries.

REG::

{r1 – r31} Set of all regions.

SRC::

{s1 – s2} Sources of commodities: s1 (domestic) and s2 (foreign).

COM::

{c1 – c157} Set of all commodities.

1.3 Variables

Variable	Closure	Set range	Description
$demCSR_{i,s,r}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Percentage change in demand for commodity i, s within region r
$empr_{r}$	endog	$r \in {\text{REG}}$	Percentage change in regional employment
$emp^{(C)}$	exog		Percentage change in national employment. Input from CHINAGEM
$grpfc_{r}$	endog	$r \in {\text{REG}}$	Percentage change in real gross regional product (at factor cost) for region r
$grpmp_{r}$	endog	$r \in {\text{REG}}$	Percentage change in real gross regional product (at market prices) for region r
$gdpreal^{(C)}$	exog		Percentage change in real GDP (at market prices). Input from CHINAGEM
$labind_{j}^{(C)}$	exog	$j \in {\text{IND}}$	Percentage change in national employment in industry j. Input from CHINAGEM
$reg4_{i,r}$	exog	$i \in {\text{COM}}$ $r \in {\text{REG}}$	Percentage change in share of exports of i leaving China from region r
$reg5_{i,s,r}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Percentage change in share of economy-wide public consumption demands for i, s accounted for by government demand in region d
$relemp_{r}$	endog	$r \in {\text{REG}}$	Used for calculating the deviation in region r’s employment from national employment
$x0CSR_{i,s,r}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Percentage change in supply of commodity i, s from region r
$x1r_{i,s,j,r}^{{}}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $j \in {\text{IND}}$ $r \in {\text{REG}}$	Percentage change in demand for good i from source s by industry j in region d for input to current production
$x1csi_{i,s,j}^{(C)}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $j \in {\text{IND}}$	Percentage change in demand for commodity i from source s by industry j for input to current production. Input from CHINAGEM
$x2r_{i,s,j,r}^{{}}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $j \in {\text{IND}}$ $r \in {\text{REG}}$	Percentage change in demand for good i from source s by industry j in region r for input to capital formation
$x2csi_{i,s,j}^{(C)}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $j \in {\text{IND}}$	Percentage change in demand for commodity i from source s by industry j for input to capital formation. Input from CHINAGEM
$x3r_{i,s,r}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Percentage change in demand for commodity i, s by households in region r
$x3_{i,s}^{(C)}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$	Percentage change in household demand for source-specific commodity i, s. Input from CHINAGEM
$x4r_{i,r}$	endog	$i \in {\text{COM}}$ $r \in {\text{REG}}$	Percentage change in demand for exports of i via a port in region r
$x4_{i}^{(C)}$	exog	$i \in {\text{COM}}$	Percentage change in national exports of commodity i. Input from CHINAGEM
$x5r_{i,s,r}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Percentage change in demand for commodity (i, s) by government in region r
$x5_{i,s}^{(C)}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$	Percentage change in government demands for i, s at the national level. Input from CHINAGEM
$\Delta {\text{X6R}}_{i,s,r}$	endog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$ $r \in {\text{REG}}$	Change in demand for (i, s) for addition to inventories in region r
$\Delta {\text{X6}}_{{\text{i,s}}}^{{\text{(C)}}}$	exog	$i \in {\text{COM}}$ $s \in {\text{SRC}}$	Change in national demand for commodity i from source s for addition to stocks. Input from CHINAGEM
$xmar_{i,r}$	exoga	$i \in {\text{COM}}$ $r \in {\text{REG}}$	Percentage change in demand for commodity i for use as a margin service to facilitate commodity flows to/within region r
$\, y_{{}}^{(C)}$	exog		Percentage change in national household disposable income. Input from CHINAGEM
$yr_{r}$	endog	$r \in {\text{REG}}$	Percentage change in regional household disposable income
$z_{j}^{(C)}$	exog	$j \in {\text{IND}}$	Percentage change in activity level of industry j. Input from CHINAGEM
$z_{j,r}$	endog	$j \in {\text{IND}}$ $r \in {\text{REG}}$	Percentage change in output of regional industry j, r

1. ^a Exogenous in this description of the core equations, but endogenously related to trade flows in the implementation of the full model. See discussion in Sect. 14.3.

1.4 Coefficients and Parameters

See Table 14.3.

Table 14.3 .