Economic Growth and Carbon Emission Control -A case study of power industry in China
AbstractMany countries have achieved moderate to dramatic growth during the last few decades, and the world-widely continued economic growth results in increased wealth and deteriorated environment. The relationship between economic growth and environmental quality has received great attention in empirical and theoretical studies. But results are mixed: some find that economic development inevitably leads to environmental deterioration due to resource depletion and pollution, while others find that continued economic development helps to improve environmental quality. Further works are required in a specific context to answer the question whether environmental improvement is compatible with continued economic growth. We intend to provide insight on the potential for carbon emissions control within one nation in the absence of international agreement. The electricity generation sector in China was chosen to demonstrate the economic impact of possible emissions control on the production of power industry in this study. The important economic questions include: What are the optimal policies to provide firms with the incentive to abate carbon emission? Does taxation or subsidy work? What are the impacts of emission control on economic growth? An endogenous growth model is set to represent a regulated power industry , and a Coub-Douglas production function is used to describe the joint production of electricity and carbon emissions. The modified Hamilton approach is employed to solve the model under three possible polices: emission fee, coal tax and abatement subsidy. The theoretical analysis suggests that firms have no incentive to abate in the absence of regulation, and finds that the ratio of emissions to desired output is not a constant, but a function of productive capital and other parameters. The non-constant ratio provides the theoretical grounds to choose the appropriate policies for emissions control. And the sustainable growth could be achieved when appropriate environmental instruments are chosen. Moreover, the optimal conditions derived from the model, rather than ad hoc specification, are used to examine the relationship between desired output and emissions for empirical analysis. Data comes from the China Statistical Yearbook and China Electric Power Yearbook, providing the provincial information for the period 1993-2003. Joint estimation of emissions and output is done using full information maximum likelihood (FIML) method. The optimal emission tax rates are estimated as 59.78%, 13.78% and 6.88% corresponding to abatement efficiencies of 1%, 5% and 10%, respectively. The optimal input tax rates ( ) are 54.05%, 56.13%, 57.55% 65.11% corresponding to discount rate ( ) of 0.05, 0.08, 0.10, 0.20 respectively. The results suggest that the sustainable growth could be achieved when appropriate environmental instruments are chosen, and emission tax is preferred to input tax in the sense of social cost, whenever detection of emissions is not costly and abatement technology allows removing at least 5% of total emissions at pipe end.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49363.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Economic growth; carbon emission control; power generation; China; Environmental Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-16 (All new papers)
- NEP-ENE-2009-05-16 (Energy Economics)
- NEP-ENV-2009-05-16 (Environmental Economics)
- NEP-FDG-2009-05-16 (Financial Development & Growth)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.