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Green transformation of the building industry and the government policy effects: Policy simulation based on the DSGE model

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  • Sun, Chuanwang
  • Xu, Zhehong
  • Zheng, Hongwei

Abstract

The green transformation of the building industry plays a key role in China's goal of carbon neutrality. This paper creatively brings the green transformation behavior of the buildings industry into the Dynamic Stochastic General Equilibrium (DSGE) model and widens the application to simulate the impact of green building subsidies and carbon emission tax on the green transformation of China's building industry. The DSGE model observes the changing trend of China's output, consumption, investment, and social welfare and provides references for policy-makers to realize sustainable economic development. The results show that the steady-state values of most main variables present an inverted U-shaped trend in the transformation. At the initial stage of the transformation, tax aggravation is good for carbon emission reduction but not for economic growth, while technical achievement and subsidies are contrary. Meanwhile, technical achievement brings the highest social welfare while subsidies bring the least. Urban analysis suggests that the large city shows more vitality and potential in consumption while there is a large growth room for capital investment in the small city in the future. When the transformation enters the middle and late stages, none of the above policies can further promote economic growth except technical achievement.

Suggested Citation

  • Sun, Chuanwang & Xu, Zhehong & Zheng, Hongwei, 2023. "Green transformation of the building industry and the government policy effects: Policy simulation based on the DSGE model," Energy, Elsevier, vol. 268(C).
    • Handle: RePEc:eee:energy:v:268:y:2023:i:c:s0360544223001159
    DOI: 10.1016/j.energy.2023.126721
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