A provincial lateral carbon emissions compensation plan in China based on carbon budget perspective.

Inter-provincial lateral carbon compensation (IPLCC) is considered as a market-based tool to achieve the goal of carbon emission mitigation from the national level as well as contribute to fair development rights of various provinces. However, empirical research on lateral carbon compensation is still insufficient at the provincial level. Therefore, the improved carbon budget method is proposed to construct a provincial carbon budget accounting and evaluate the level of provincial lateral carbon compensation. The findings are concluded as follows: (1) Carbon emission and absorption in China have experienced rapid growth in the period of 2005-2015. (2) There exists an obvious spatial difference in the provincial carbon budget. The amount of provincial carbon emissions is high in the east and low in the west, while the provincial carbon absorption is high in the northeast and southwest and low in the other regions. (3) 30 Provinces in China can be classified into three types, namely those that have to pay for lateral carbon compensation, those that should be refunded, and those in relative equilibrium. (4) Whether a province should pay for or be refunded from lateral carbon compensation is related to the development level of the secondary industry. (5) Inter-provincial lateral carbon compensation will play a significant role in the top-level design of total carbon emission controlling across different provinces in China. Finally, three policy implications are proposed, including constant promotion of the decoupling of provincial economic development and carbon emissions, formulation of accounting standards and methods for lateral carbon compensation, and adoption of multiple lateral carbon compensation methods.