Economic Growth Effect and Optimal Carbon Emissions under China’s Carbon Emissions Reduction Policy: A Time Substitution DEA Approach

Abstract

In this paper, provincial panel data for China during 1995–2015 and the time substitution data envelopment analysis (DEA) model were used to measure the influences of China’s carbon emissions reduction policy on economic growth under various reduction targets and to determine optimal economic growth and optimal carbon emissions of each province. In addition, this paper empirically examines the factors that influence the optimal economic growth and carbon emissions. The results indicate that not all provinces will suffer from a loss in gross domestic product (GDP) when confronted by the constraints of carbon emissions reductions. Certain provinces can achieve a win-win situation between economic growth and carbon emissions reductions if they are allowed to reallocate production decisions over time. Provinces with higher environmental efficiency, higher per capita GDP, smaller populations, and lower energy intensity might suffer from a larger loss in GDP. Therefore, they should set lower carbon emissions reduction targets.