*1.1. Background and Motivation*

Many countries have announced their target goals on carbon neutrality. In the lowcarbon development process, EU countries are at the forefront of the world both in technologies and management [2,3]. The EU proposes to achieve the goal of carbon neutrality by 2050, and China has announced the goal of carbon neutrality in 2060, indicating that nearly 1/3 of the world's emissions will go zero in 2060 [4,5]. However, no matter how we talk about carbon neutrality, we still need to consider the economics of carbon neutrality because there is indeed a strong trade-off between emission mitigation and economic development [6–8], regardless of many opposite hypotheses, such as the Porter hypothesis [9,10].

**Citation:** Huang, S.; Du, C.; Jin, X.; Zhang, D.; Wen, S.; Wang, Y.; Cheng, Z.; Jia, Z. The Boundary of Porter Hypothesis: The Energy and Economic Impact of China's Carbon Neutrality Target in 2060. *Energies* **2022**, *15*, 9162. https://doi.org/ 10.3390/en15239162

Academic Editors: Junpeng Zhu and Xinlong Xu

Received: 31 October 2022 Accepted: 1 December 2022 Published: 2 December 2022

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If the cost of emission mitigation is beyond expectation, governments may reduce their interest in reducing emissions.

Certainly, measuring the cost of emission mitigation, especially carbon neutrality, is essential for us human beings. The existing literature has estimated the marginal cost or efficiency cost of emission mitigation in many ways from different perspectives. Qin et al. (2019) [11] simulated the cost-effectiveness of China's green transition during the 12th five-year plan (2011–2015). Wang et al. (2016) [12] found that different regions have totally different abatement costs (measured by shadow price), and potential emissions (measured by the growth rates of emissions and economic outputs), highlighting the importance of specializing the carbon mitigation policies among the different regions. Cui et al. (2014) [13] applied a computable general equilibrium model to simulate the cost-saving effect of the emission trading scheme (ETS) and found that the carbon emissions trading only covered the pilots and that the unified carbon emissions trading market could reduce the total abatement costs by 4.50% and 23.67%.

However, only measuring the economic cost may not be enough. The economic cost varies by space and time. Using the directional distance function model, Wang et al. (2020) [14] measured the policy effects on CO2 emission mitigation and abatement costs during the 13th Five-Year Plan (2016–2020) in China. They found high emission mitigation targets accompanied by high emission reduction costs. In the short term, the impact on different targets is not that obvious, but as time goes by, the effect increases. Uncertainties also affect the cost. Guo et al. (2019) [15] used a stochastic dynamic programming model to evaluate the impacts of uncertainties on the abatement planning process and found that uncertainties could increase the total abatement costs by around 5–7%.

Reducing the cost of the carbon mitigation policy is an essential topic of emission mitigation strategies [16]. Scholars have focused on the following methods: the clean development mechanism (CDM) [17], certified emission reduction (CER), carbon linkage, and low-carbon technologies. Wang et al. (2016) [18] analyzed the cost–benefit of wasteto-energy projects under China's clean development mechanism. They found that with or without the CDM, there is still a huge GHG reduction potential in solid waste management in China, which may reduce the cost of emission mitigation in China. Li et al. (2019) [19] found that the Chinese Certified Emission Reduction (CCER) scheme saves the national carbon trading system costs by applying a game theory. Zhang et al. (2019) [20] found that carbon linkage could reduce China's ETS pilots' carbon emission trading scheme's cost. Sun et al. (2018) [21] argued that most low-carbon technologies are cost-effective, with average annual cost savings of 71.43 billion CNY. Johansson et al. (2020) [22] found that the biofuels mandate in the United States reduced the emission reduction cost significantly, ranging up to 20 USD per ton. The Canadian case study finds a similar perspective [23].

Similar to the perspectives in the literature above [13], this paper also considers carbon pricing as a relatively cost-effective way to reduce emissions. Carbon pricing has proven effective in many regions and has been studied from many perspectives [24–27]. Among them, carbon emission trading schemes and carbon tax (CT) are two of the most popular mitigation strategies.

In 1990, the Netherlands began to levy a carbon tax: one of the earliest countries in the world to impose carbon taxes [28]. Sweden and Denmark also have strong and effective carbon tax policies [29–31]. The carbon tax policies of many countries, such as the United States, Australia, France, China, and Japan, are full of twists and turns. However, in most of these countries, a new kind of carbon pricing occurred: ETS. California seems to be the only state in the USA that has implemented a cap-and-trade scheme since 2013 [32]. EU-ETS is the first and the largest ETS in the world currently [33,34]. In 2010, the world's first city-level compulsory emission trading system was established in Tokyo, Japan. Then, Saitama Prefecture established the emission trading system in 2011. Saitama Prefecture's ETS is mainly a copy of the Tokyo ETS [35]. China's ETS pilot started in 2013 [36], and China's national ETS has already officially commenced on July 16, 2021. The revenue recycling scheme is one of the most concerning topics that may affect emission mitigation

efficiency. For example, Liu and Lu (2015) [37] argued that the recycling scheme matters in the long-term effect of the carbon tax and the sectors' burden. Sun et al. (2021) [38] designed a recycling scheme to improve the emission mitigation effect and reduce the gross domestic product (GDP) loss.

Until now, there have been many studies focusing on the comparison of carbon pricing strategies [39]. However, it seems that there is little in the literature focusing on the economic losses of the strategies and no paper measuring how much of the productivity should be improved to neutralize the economic losses, or in other words, the boundary of the Porter hypothesis. It is the knowledge gap that this paper wants to fill. To fill the gap, the paper first measures the GDP loss of ETS and CT under carbon neutrality, then focuses on the changes by carbon neutrality and the boundary of the strong Porter hypothesis using CGE modeling technology.
