The impact of conventional policy instruments on climate change mitigation in China

We question whether conventional energy and CO₂ emissions policy measures can rapidly and significantly reduce CO₂ emissions within a dynamically growing economy. We focus on domestic material consumption (DMC) and take China as a case study. By using ridge regression, we explore the impact of energy and climate policy instruments on total CO₂ emissions in China from 1990 to 2020. Results show that policy instruments have contributed to mitigating CO₂ emissions, but their impact is not statistically significant. When distinguishing policy instruments into command-and-control and market-based types, the latter emerges as statistically significant, although its impact on CO₂ emission mitigation is rather weak. We explain the weak impact of conventional policy measures on total emissions with China’s energy mix, fallacies in the relevant institutional framework, and a focus on economic growth driven by material factors. Our study suggests that a parallel pursuit of economic growth and CO₂ emissions reduction may yield improvements in intensive variables, like carbon intensity and energy use/GDP. Still, the strategic goals of significant emissions reduction are likely to be largely missed. We propose an unconventional policy approach that combines restrictive supply and demand-side climate policy instruments.