*4.2. Impacts on GDP*

Figure 3 shows the impact of CT and ETs on the gross domestic product (GDP). The bar shows the GDP every five years, and the line shows the average annual growth rate of these five years. In the BAU scenario, China's GDP growth rate gradually decreases. The growth rate will be 5.5% in 2020–2025 but will reduce to 4.50% in 2055–2060. The BAU scenario's GDP settings are similar to several relevant studies. For instance, compared with Fang et al. (2015) [53], the path is pessimistic about the GDP growth from 2020 to 2040 but relatively optimistic from 2040 to 2060. However, in general, it is a fairly optimistic estimate compared with the other literature [54] because this paper considers that China is a developing country with a vast population and is implementing the rural revitalization strategy, so there is still much room for GDP growth in rural and backward areas.

**Figure 3.** Impacts on GDP during 2020–2060.

Note that from 2021 to 2060, the average annual growth rate of the CT scenario was 4.23%, and in the ETS scenario, the average annual growth rate was 4.22%, indicating that the growth rate in the two counterfactual scenarios is similar to each other. As under the same emission mitigation path, there may be little differences between the economic impact of the full coverage carbon tax and carbon trading [39].

In the long run, it seems that there is no apparent difference in the impact of the carbon tax and carbon trading covering the same industry and emission mitigation on the total economy. In the early stage of the carbon neutrality process (2020–2040), the economic loss caused by the carbon pricing method will not be substantial. However, with the strict carbon emission reduction targets, economic losses gradually increased. From 2035 to 2040, the target of carbon neutrality will reduce economic growth by 0.6%; from 2055 to 2060, the economic growth will decrease by 1.7% in the final period of carbon neutrality. In summary, in the year 2020–2060, the average growth rate of the BAU scenario is about 5.0%, while the average growth rate under the carbon-neutral framework is around 4.2%: a decrease of about 0.8%.
