Macroeconomic Risks of Carbon Emission Constraints

Green and low-carbon transformation is an inevitable trend for protecting the climate and ecology while achieving stable economic development. To actively and prudently achieve carbon emission targets, the government will further implement robust policy measures to support the development of a green and low-carbon economy. However, there are risks associated with the implementation strength and frequency of future carbon emission constraint policies, which could impact different market economic entities and cause macroeconomic fluctuations. This paper analyzes the transmission mechanism of the risks associated with carbon emission constraint policies, and examines their impact on the macroeconomy. We find that the risks associated with carbon emission constraint policies can inhibit investment and financing at the capital level, and cause output decline and deflation at the production level.