Price transmission mechanism and socio-economic effect of carbon pricing in Beijing: A two-region social accounting matrix analysis

Cities are important bases of economic development. It is essential to explore carbon mitigation efforts at the city level, particularly in developing countries with large quantities of energy consumption and carbon emission. This study has focused on the impacts of carbon pricing on sectoral prices and the carbon price transmission mechanism across sectors and along price-transmitted paths, taking the city of Beijing, China, as a case. A two-region social accounting matrix for China in 2012 was built, with one region being Beijing, and the other region representing the rest of China (ROC). The SAM price model and structural path analysis were employed to calculate both the extent of and the detailed price transmission of each sector in Beijing when carbon pricing was implemented just in Beijing or in the whole of China. The results show that the growth of prices is not serious and that the Electricity & Heating Production and Supply Sector in both Beijing and the ROC contributes most to the price growth in almost all sectors in Beijing. The price-transmitted paths starting from Non-metallic Mineral Products and Smelting and Pressing of Metals in ROC transmit the carbon price quickly and directly by the shortest paths. While the price-transmitted paths routed by Electricity & Heating Production and Supply Sector, Transport Service, and Other Services will show far-reaching effect.