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Research on Economic Growth Mechanism under Carbon Emission Constraint

Submit Time:18-07-2017 | Zoom In | Zoom Out

Author:Jin Xiangfeng and Ren Dong | Source:Guangming Daily

Abstract:

  In recent years, China has actively tackled climate change, adopted control actions on energy and carbon emission in both total quantity and intensity, and put forth the strategic goal of reaching the carbon emission peak by 2030 and as early as possible, so that economic growth faces profound changes in both internal and external environment. It can be easily found in the research of the effect of carbon emission on economic growth that, the effect of carbon emission constraint on economic growth has not been taken into consideration in the mainstream economic growth models. It is also generally believed in traditional analysis that, in the background of global carbon emission reduction, the carbon emission constraint will produce an adverse effect on the potential economic growth rate in a short term if other conditions remain unchanged. However, with the increasing global concern on environmental issues, people started to consider in different aspects at both theoretical and practical levels the influence factors of carbon emission constraint in a fairly long term and the transmission mechanism of their effect on the economic and social development.

  Conceptually, the carbon emission constraint will produce a direct effect on economic growth, mainly as the forthcoming changes in the economic growth route under the conditions when the carbon emission level is controlled and the total amount of carbon emission is reduced, so the tapping of economic growth potential in the future will be shifted to energetically increasing the energy utilization efficiency and raising the economic growth level obtained with unit carbon emission. Therefore, two different path-mechanisms can be established for the effect of carbon emission constraint on economic growth.

  Mechanism I: readjusting the industrial structure, to promote optimized resource allocation and to realize the “structural emission reduction” of carbon. That is, the limited resources will be allocated through optimization to areas with lower carbon emission per unit output value, thus realizing the double goals of economic structure optimization and carbon emission reduction.

  Mechanism II: the technical upgrading in industries will increase the production efficiency, thus increasing the resource utilization efficiency and realizing the “efficiency-based emission reduction” of carbon. With this acting mechanism, no optimized allocation has been realized for the resource structure, instead, the carbon emission amount per unit output value is reduced and connotative economic growth realized under the existing resource allocation conditions by increasing the production technical level and technical efficiency.

  On the basis of the above analysis, the authors believe that the carbon emission constraint conditions can be added into the mainstream economic growth analysis model, that is, the structural readjustment of industries and production elements and progress in production technologies, the efficiency readjustment for increasing production efficiency are incorporated in the economic growth model, and then the evolution feature of economic growth under carbon emission constraint converges to the optimal theoretical growth route can be simulated and analyzed by controlling the critical influencing factors. Among them, mechanism I embodies the rising production level resulted from carbon constraint promoting the optimization and adjustment of industrial structures by applying the carbon constraint on the capital and labor terms; and mechanism II reflects that technological innovation is pushed ahead with carbon constraint to raise the production efficiency by applying carbon constraint on the total factor productivity term. On the basis of the features and objectives of research, the authors have taken full consideration the difference in the balanced growth route with or without the carbon emission constraint conditions, and built up the R-C-K (Ramsey-Cass-Koopmans Model) model for economic growth. The R-C-K Model was proposed and established by F. Ramsey, a mathematician and logician of the Cambridge University of the UK in December 1928, and is an important application model in the research of contemporary macro-economics. The core issue of research in the R-C-K Model is the cross-phase resource allocation, to analyze the optimal economic growth route under the deterministic conditions, and to deduce spanning conditions that meet the optimal route. The following important conclusions can be found by simulating the dynamic changing process of balanced growth route under different carbon emission constraint intensities:

  First, when no change takes place in carbon emission constraint, the presence or absence of carbon emission constraint can produce a significant heterogeneous effect on the output level in steady state. In short term, under the carbon emission constraint conditions, the output level will be lower than that without carbon constraint, the realistic interpretation of this effect is that, due to the macroscopic readjustment of carbon emission, some elements with backward production capacity and low application efficiency will be expelled from the market in short term, thus resulting in reduction of output level in short term. With the steady progress of the carbon emission constraint policy, the steady output level will grow stably, and gradually exceed the output level without carbon constraint by an increasing magnitude. This shows that in a long run, the imposing of carbon emission constraint is conducive to promoting the economic growth, and can achieve a higher steady state level of economic growth through such acting mechanisms as the optimization and readjustment of industrial structure, optimized resource allocation, progress in production technologies and increase of production efficiency.

  Second, when the carbon emission constraint has changed and the increasing rate of technological progress brought by the carbon emission constraint is lower than the decreasing rate of structural readjustment, the simulated steady state output level is higher than that when the carbon emission constraint remains unchanged in the initial phase. However, in a long run, the policy changes “tend to worsening”, the resulted output level, although higher than the steady state output level without carbon emission constraint, is lower than the steady state output level with no change in the carbon emission constraint. The carbon emission constraint is subjected to the physical features of carbon emission reduction, in the initial period of an extensive economic entity transiting towards an intensive one, the carbon emission reduction potency is big, with much potential space for emission reduction, however, there is physical invariance in every unit of energy conversion, therefore this process cannot go on all the time, and the space of carbon emission reduction will be daily narrowing if mechanism I is adopted to realize the carbon emission reduction goal.

  Third, when the carbon emission constraint has changed and the increasing rate of technological progress brought by the carbon emission constraint is higher than the decreasing rate of structural readjustment, the simulated steady state output level value is lower than that when the carbon emission constraint remains unchanged in the initial phase. However, in a long run, the policy “tends to improving”, the output level brought by changes in the carbon emission constraint is not only higher than that without carbon emission constraint, and even higher than the steady state output level when the carbon emission constraint conditions remain unchanged. Therefore in the long term, it is mechanism II that really plays a critical role in raising the output level in applying carbon emission reduction, with the continual application of new technologies and new inventions, more and more carbon emission reduction space can be produced with technological progress and increase of efficiency, so the technological progress and increase of efficiency brought by carbon emission constraint will be the main sources of motive force for prolonged economic growth.

  It can be found through comparison that, although both mechanisms I and II of carbon emission constraint can produce significant effect on the output level in steady state, in mechanism I, the readjustment of industrial structure has an end point, while in mechanism II, the technological progress has no end. Therefore, the influencing force of the first acting mechanism of carbon emission constraint will decrease daily, while that of the second acting mechanism of carbon emission constraint will increase daily, giving full play to the role of technological progress in mechanism II, so it is more conducive to realizing a higher steady state value of output level of economy system under the steady state. It is the opinion of the authors that, the implementation of carbon emission constraint policy can intrinsically influence factors conducive to economic growth such as the industrial structure, self-reliance innovation, fixed asset investment and foreign-orientation of economy, to realize transition to low carbon growth of economy in the new normal of economic development. Therefore, it is necessary to comprehensively push ahead relevant work on aspects of scientific and technological innovation, industrial structure readjustment, financial and banking system reform and supervision and examination systems. The first is to enhance the core engine of scientific and technological innovation to drive the low-carbon development, strengthen low-carbon scientific and technological self-reliance research and development, import, digestion and re-absorption, speed up the conversion and application of relevant results, establish and complete the evaluation and incentive mechanism for low-carbon scientific and technological innovation, and rely on innovation to push forward the optimization and upgrading of traditional industries and to support and lead the low-carbon growth. The second is to build up a high end, high efficiency, low-carbon and green modern industrial system, explore step by step the win-win route to realize both low-carbon growth and industrial structure upgrading, and achieve the harmonious unification of rationality, high grade and low-carbon of the industrial structure. The third is to complete the financial and banking support system for low-carbon development, enhance the guiding function of financial and tax policies in the transition of economic development pattern, explore the application of usufructs such as carbon emission right, pollution emission right, energy consuming right and water use right, and credit enhancing and guarantee forms with intellectual property rights and expected green earning pledge, to widen the guarantee and credit enhancing channels for green finance. The fourth is to improve the administrative performance examination and assessment mechanism merely based on GDP, speed up the establishment and completion of a low-carbon based GDP accounting system, and build up the examination and incentive mechanisms that promote low-carbon economic growth, to unify the administrative performance examination with the sustainable development of economy, environment, resources, ecology and society, and ensure realization of the low-carbon economic development goals.

  (Author entities: Jin Xiangfeng, Management and Economics Department of Tianjin University; Ren Dong, Macroeconomic Research Institute of Shandong Province)


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