**2. Scenario Design**

The most important part of carbon neutrality is carbon emissions. This paper does not consider the impact of adding negative carbon emission technology at present because if negative carbon emission technology is to be added (such as forest carbon sequestration and carbon capture), more assumptions will be included in the model, which may affect the robustness of the model's conclusions.

We need to consider the remaining emissions by fossil energy consumption which are challenging to replace, such as air transportation, marine transportation, and energy chemicals, that will be captured by negative carbon emission technology. The paper calculates the

emission share of these sectors from the total emissions in 2019 from the CEADs database (https://www.ceads.net.cn/, accessed on 1 November 2022) to be about 9%. Considering how other sectors may have positive emissions (increasing remaining emissions) and land transportation may be substituted by electric vehicles (reducing remaining emissions), the paper holds the assumption of 9% remaining. Thus, we have assumed a significant reduction in carbon emissions by 2060 caused by carbon neutrality measures such as ETS and CT, which is 91% lower than the baseline (BAU) scenario (Figure 1). Although negative carbon emission technology is not included in the model, we still need to assume the existence of negative carbon emission technology to ensure the reliability of the scenario simulation.

**Figure 1.** Energy-related CO2 emissions during 2020-2060 in all scenarios. Notes: the bar chart shows the carbon emissions in 2020-2060 under different scenarios. The line chart shows the reduction rate of carbon emissions in the CF scenarios in each year compared with the BAU scenario. The CF scenarios include the ETS and the CT scenarios, which are illustrated in Table 1.



This paper assumes that China mainly uses carbon pricing to achieve the goal of carbon neutrality. The carbon tax is a long-discussed carbon pricing strategy for Chinese policymakers. Although a national carbon trading market was online in 2021, the current carbon trading market only covers the power generation industry, mainly because of the poor quality of data detection [43]. Therefore, a carbon tax may be a supplementary policy for China's carbon trading market or may even become the primary emission mitigation strategy.

In other words, at present, the carbon trading mechanism is relatively mainstream, and the positive stimulating effect of such a mechanism on enterprises seems to be more pronounced. Therefore, China may gradually improve the quality of monitoring, reporting, and verification (MRV) and cover more industries in the carbon trading system. Thus, ETS may also become the primary emission mitigation strategy in China.

Therefore, this paper first considers the construction of a CGE model based on the benchmark scenario, named the BAU scenario, and then constructs the CGE model based on the carbon tax or carbon trading scenario under the carbon neutrality framework and then compares the results of the carbon neutrality scenarios and the BAU scenario through similar analyzing methods for the experimental group and the control group. The scenario design is shown in Table 1. The paper assumes that the coverage of CT and ETS is in line with China's government plan; all the energy-intensive industries will be covered by carbon pricing [44]. Moreover, in 2040, carbon pricing will cover all kinds of enterprises.
