*7.1. Conclusions and Policy Implications*

The Chinese government announced the goal of achieving carbon neutrality by 2060. This paper analyzes the impact of carbon pricing (carbon tax and carbon trading) on the economy and energy through the CGE model. In addition, according to the strong Porter hypothesis, this paper constructs new scenarios to explore the additional TFP value under the assumption of GDP neutrality and carbon neutrality, which provides a marginal contribution to the current literature.

This paper simulates carbon pricing (carbon tax and carbon trading) to achieve carbon neutrality in 2060. It was found that achieving the carbon neutrality target would reduce China's annual economic growth by about 0.6% during 2020–2060. Carbon pricing can significantly reduce the share of fossil energy consumption and reduce overall energy consumption but also partially increase the irreplaceable energy share (such as water and air transportation and oil consumption). The process of carbon neutrality will significantly increase the price of energy-intensive products, such as energy-processing products and steel, and such a process will hardly have a significant impact on agriculture and services.

According to the strong Porter hypothesis, environmental regulations may lead to technological innovation, thus improving enterprise productivity. In addition, this paper simulates the additional total factor productivity needed to recover the economic loss caused by the carbon neutrality target. The results show that TFP needs to increase by about 0.056% every year from 2020 to 2030 to make up for the economic losses caused by the 2030 carbon peak. However, if we want to make up for the economic losses caused by carbon neutrality in 2060, TFP needs to be increased by about 0.568% annually in 2020–2060. From this point of view, the impact of carbon neutrality on the economy may be far greater than that of carbon peaking, and the economic cost should be carefully considered. By referring to the other literature, this paper believes that additional 0.568% annual TFP growth is hard to achieve, not to mention the cost of increasing productivity.

The growth of TFP will lead to improved production efficiency, and the prices of most commodities will be reduced by varying degrees, especially the prices of non-energyintensive commodities. However, the prices of energy-intensive commodities will rise due to the dual effects of TFP and carbon neutrality. The main reason for this is that the increase in TFP will make the factor demand rise, but due to carbon constraints, the supply of energy-intensive products is restrained. Therefore, in the case of rising demand and limited supply, the price of energy-intensive products will rise relatively. Similarly, the growth of TFP will increase the share of renewable energy, mainly because under the carbon constraint, the additional energy demand must be provided by renewable energy rather than fossil energy. At the same time, the paper also finds that the price of renewable generation increases in TFP-related scenarios, which also shows that the demand for renewable energy will increase with the increase in energy demand and the limitation of thermal power generation.

These conclusions have a specific significance for our scientific understanding of carbon neutrality. TFP in 2020–2030 only needs an additional 0.056% to make up for the economic loss caused by the peak of carbon emissions; however, we need an annual TFP increase of 0.568% to make up for the economic loss caused by carbon neutrality, and the GDP growth loss is about 0.6% every year. Therefore, in the process of carbon neutrality, encouraging enterprise innovation and improving efficiency may be the key to reducing economic loss and welfare loss.
