Can carbon reduction credit achieve the win-win of carbon emission reduction and stabilizing economic growth? E-DSGE simulation under the path of green technology innovation

Chen Bian¹Zongyi Chen^2*Zhiguo Fan¹Yuyong Tan¹

• ¹Weifang University of Science and Technology, Weifang, China
• ²Qilu University of Technology, Jinan, Shandong Province, China

China's green high-quality development relies on the advancement of green technology innovation. This paper innovatively integrates both the traditional carbon tax and the innovative carbon reduction credit into an endogenous green technology innovation mechanism within an E-DSGE model. By systematically comparing their policy effects and transmission pathways, it offers new perspectives for green finance theory and public policy research. Our study shows: First, carbon reduction credit demonstrates superior policy efficacy compared to carbon tax mechanisms. Aligning with the neoclassical "compliance cost" framework, the carbon tax exhibits weaker incentives for green technology innovation and less balanced carbon reduction-growth coordination than carbon reduction credit. Second, supporting policies -such as tax cuts, fiscal expenditure expansion, and monetary tools like central bank lending rate cuts and reserve requirement ratio reductionscan significantly enhance the implementation effectiveness of carbon reduction credit. Third, the coordinated implementation of carbon reduction policies and macro-control policies yields stronger outcomes in both emission reduction and growth stabilization than standalone policies, while generating positive social welfare spillover effects. These findings robustly validate the strategic value of carbon reduction credit mechanisms in advancing China's sustainable development, providing an innovative policy tool for resolving the tension between environmental governance and economic growth.