China’s Income Gap and Inequality under Clean Energy Transformation: A CGE Model Assessment

Abstract To achieve nationally determined contribution (NDC) targets, China has developed a series of low carbon development plans. Among them, the clean energy transformation is very crucial. This study evaluates the impact of a set of policies including the development of renewable energy, upgrading heavy industry, and energy efficiency improvement on China’s income gap between 2012 to 2050. A dynamic computable general equilibrium (CGE) model with detailed representations of economic activity, an upgraded labor market and disaggregated labor types based on statistical and survey data is used. Our research provides support for the necessity of low-carbon policies to achieve NDC targets. Results show some key findings. First, low-carbon policies have the greatest impact on employment across all energy industries, with negative impacts in most traditional energy sectors and positive impacts in most renewable power sectors. Second, labor will continue to migrate from rural to urban areas with the transformation of the economic structure and the urbanization rate will further increase, reaching a maximum of around 70%. The reduction of the rural population will bring new opportunities for the modernization of agriculture, increasing the income of rural residents and realizing the equitable development between urban and rural areas. Third, the income gap among urban residents will widen due to the different level of labor demand for employees with different education levels.