Focusing on 199 Chinese cities at or above prefectural level, this paper mainly explores the interaction mechanism between urbanization and carbon emissions in China from 2003 to 2016, and evaluates the benefit and cost of different carbon reduction measures. Specifically, an econometric model was established based on simultaneous equations, and estimated by the generalized method of moments (GMM). The results show that: every 1% increase in the urban percentage of population boosts the gross domestic product (GDP) by 0.332%, while elevating the carbon intensity by 0.175%; the key to resolve the contradiction between urbanization and carbon reduction lies in effective control of the economic cost of carbon reduction; the measures like promoting tertiary industry and reducing the proportion of secondary industry should be adopted cautiously; the carbon reduction cost will
surge up, if the proportion of secondary industry reduces or that of clean energy rises too fast; in the future, the carbon reduction strategies should focus on the low-carbon development and the transform of economic growth mode.