Industrialization, environmental externality, and climate mitigation strategies

Industrialization process in developing countries should be carefully considered in formulating climate policies as it’s a take-off period with high carbon emissions (a significant demand of carbon-intensive products such as building materials, steel, and cement, among others), implying a more prominent trade-off between development and emission reduction. Considering developing countries’ large population and potential for high economic growth during the transition period, their industrialization process is critical to shaping future global emissions and formulating climate policy.

Building on the foundations of intertemporal optimization Integrated Assessment Models (IAMs), the negative externality of climate change, and industrialization process research, this paper develops a framework that integrates global climate–economy interactions and the industrialization process in the developing world, enabling a comprehensive analysis of long-term mitigation policies and national strategic interactions. Specifically, the authors build a Coupled Climate and Economic Dynamics model with regional Transition (CCEDT), and incorporate game mechanism in the model. Results show that, given the industrialization process, global unmitigated baseline emissions will peak around 2040, and the global average carbon price should grow faster in the first half-century, followed by slower growth thereafter. Moreover, the industrialization process changes the regional mitigation interactions under both cooperative and non-cooperative Nash scenario.