Sectoral economic impacts of CO2 mitigation policies under different levels of stabilization targets: A study with the hybrid model DEARS

This study compares the economic impacts of different stabilizing levels of atmospheric CO2 concentration by a new intertemporal energy-economic optimization model, namely, DEARS (Dynamic Energy-economic model with multi-Regions and multi-Sectors. The model has the input-output structures defined by the Leontief production function based on the assumption of the time-series input-output coefficients scenarios with changes in technical structures. In this paper, we focus on how the sectoral economic activities are affected by the carbon mitigation policies up to the middle of this century. Simulation studies focus on atmospheric stabilization of carbon dioxide at levels of 450–650 ppm CO2 only. The impacts of sectoral productions on economic activities in the carbon stabilization cases are dependent on sectoral characteristics; the carbon emission reduction policies have less economic impacts on the sectors with less energy requirements like “service sector”, while they have more critical impacts on the sectors served as investment commodities like “construction sector,” and energy-intensive commodities like “iron and steel sector.” The GDP losses and shadow prices increase within the relatively small ranges in the S650-S500-CO2 only cases while the losses in the S450-CO2 only case increase rapidly and enormously. Innovative technologies in the “transport sector” into energy supply sectors are required in the stabilizations at 450 ppmv-CO2 only before 2030 under the assumption of the relatively rigid substitution of energy demands using the Leontief functions as in the DEARS model.