Benefits and costs to China of three different climate treaties

There are currently several ideas on the table for a climate treaty post-Kyoto. We consider the impact on China of three ideas: a cap on the CO₂ intensity, a cap on the CO₂ level, and a cap on the CO₂ intensity in key sectors. We find that a cap on the CO₂ intensity gives large environmental co-benefits to China on aggregate, but there are significant negative effects for rural households. Assuming these are addressed the country could reduce its CO₂ intensity by a third before costs outweigh environmental co-benefits. By contrast a cap confined to the manufacturing and power sector does not bring substantial co-benefits to China.