A study case of China on inter-regional carbon compensation from the perspective of carbon neutrality

The study follows the Coase theorem to solve the externality dilemma. By taking China's carbon compensation practice as a research case, this paper aims to provide evidence on pushing forward carbon compensation among regions. From the perspective of carbon neutrality, this paper takes China's regional net carbon source, which is the carbon source that differs from the carbon sink, as the environmental background value. This study modifies each China's environmental background value twice by considering each region's carbon resources endowment and the national carbon neutrality goal. With the method of principal component analysis and carbon compensation priority theory, this study builds each region's carbon compensation coefficient, recognizes the major compensation-related regions in priority, and reports the carbon compensation dollar values for each region. The main contribution of this paper is the theoretical model constructed by considering the theory of sustainable economic development with regional equality and a case study. This case study prioritizes carbon compensation order, which complements the existing literature that presents the amount of carbon compensation.