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Controlling carbon emissions in China

Published online by Cambridge University Press:  01 October 1999

RICHARD F. GARBACCIO
Affiliation:
Kennedy School of Government, Harvard University, Cambridge, MA 02138. E-mail: mun_ho@harvard.edu
MUN S. HO
Affiliation:
Kennedy School of Government, Harvard University, Cambridge, MA 02138. E-mail: mun_ho@harvard.edu
DALE W. JORGENSON
Affiliation:
Kennedy School of Government, Harvard University, Cambridge, MA 02138. E-mail: mun_ho@harvard.edu

Abstract

We examine the use of carbon taxes to reduce emissions of CO2 in China. To do so, we develop a dynamic computable general equilibrium (CGE) model of the Chinese economy. In addition to accounting for the effects of population growth, capital accumulation, technological change, and changing patterns of demand, we also incorporate into our model elements of the dual nature of China's economy where both plan and market institutions exist side by side. We conduct simulations in which carbon emissions are reduced by 5, 10, and 15 per cent from our baseline. After initial declines, in all of our simulations GDP and consumption rapidly exceed baseline levels as the revenue neutral carbon tax serves to transfer income from consumers to producers and then into increased investment. Although subject to a number of caveats, we find potential for what is in some sense a 'double dividend', a decrease in emissions of CO2 and a long run increase in GDP and consumption.

Type
Research Article
Copyright
© 1999 Cambridge University Press

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Footnotes

This work was supported through the Harvard University Committee on the Environment's China Project with funding from the US Department of Energy under contract #DE-FG02-95ER62133. We would like to thank three anonymous referees for their helpful comments on our original submission.
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