Promoting carbon emissions reduction in China's chemical process industry

The chemical process industry is the second largest carbon-emitting sector in China. Therefore, it is extremely urgent and crucial to explore how to reduce carbon emissions in the sector. This paper employs the co-integration method and scenario analysis to investigate how to reduce carbon emissions in the sector. The granger causality test is conducted and the result indicates that all the variables except lnPare granger-causes lnCE. Moreover, comparing the JJ (Johansen-Juselius) co-integration with the EG (Engle-Granger) co-integration based on the squared residual, the fitting effect and the prediction effect, we find that the EG co-integration method is better. Furthermore, we adopt the EG co-integration and scenario analysis and find that the emission reduction potential of the sector will be 63.9 Mt in 2015 and 180 Mt in 2020 under the middle scenario; and 121.4 Mt in 2015 and 327.9 Mt in 2020 under the advanced scenario. Finally, the paper provides some policy implication.