# The social cost of carbon in regions and industries from ESG perspective - a case study of eight economic regions in China

## TL;DR

This paper estimates carbon social costs in eight Chinese regions and key industries using ESG principles and game theory to guide climate policy.

## Contribution

The study introduces a novel integrated model combining ESG principles and game theory to estimate regional and sectoral carbon social costs.

## Key findings

- Northern, southern, and eastern coastal regions have higher carbon social costs than other regions.
- Industrial and power sectors have higher carbon social costs than construction and transportation sectors.
- Stricter temperature limits increase carbon social costs across economic regions.

## Abstract

As a core metric for climate policy, the scientific estimation of carbon social costs is crucial for formulating mitigation strategies. However, traditional integrated assessment models predominantly focus on the global aggregate, failing to adequately account for regional heterogeneity, sectoral characteristics, and strategic interactions between regions. They also lack systematic integration of ESG principles. To address this, this paper examines regional and sectoral carbon social costs driven by ESG development. Through cooperative and non-cooperative games, we improve the integrated economic-environmental-climate development model, take the eight economic regions in China as an example, get the carbon social cost of each economic region and typical important industries, and obtain the key parameters and the evolution law of carbon social cost. The model categorizes the carbon emissions after the implementation of emission reduction policies under the ESG perspective into direct and indirect emissions. It studies the economic impacts of the two types of emissions before and after the implementation of emission reduction policies, and conducts research on the top four typical important industries (industry, construction, transportation, and power) that rank among the top four global CO2 emitters, to obtain the analytical solution of the social cost of carbon in the region and the typical important industries. In addition, this paper numerically simulates the social cost of carbon for the four industries under the baseline scenario, cooperative game scenario, non-cooperative game scenario, and temperature limitation scenario. The study shows that the social cost of carbon in the northern, southern and eastern coastal economic regions is higher than that in other economic regions, the social cost of carbon in the industrial and electric power industries in each economic region is higher than that in the building and transportation industries, and the more stringent the temperature limit is, the higher the social cost of carbon is in the economic regions.