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Impacts of Border Carbon Adjustments on China's Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model

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  • Qin Bao

    (Academy of Sciences, Beijing, China)

  • Ling Tang

    (Institute of Policy and Management, Chinese Academy of Sciences, Beijing, China)

  • Zhongxiang Zhang

    ()
    (East-West Center, Honolulu, Hawaii, USA)

  • Han Qiao

    (College of Economics, Qingdao University, Qingdao, China)

  • Shouyang Wang

    (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, China)

Abstract

Carbon-based border tax adjustments (BTAs) have recently been proposed by some OECD countries to level the carbon playing field and target major emerging economies. This paper applies a multi-sector dynamic computable general equilibrium (CGE) model to estimate the impacts of the BTAs implemented by US and EU on ChinaÕs sectoral carbon emissions. The results indicate that BTAs will cut down export prices and transmit the effects to the whole economy, reducing sectoral output-demands from both supply side and demand side. On the supply side, sectors might substitute away from exporting toward domestic market, increasing sectoral supply; while on the demand side, the domestic income may be strikingly cut down due to the decrease in export price, decreasing sectoral demand. Furthermore, such shrinkage of demand may similarly reduce energy prices, which leads to energy substitution effect and somewhat stimulates carbon emissions. Depending on the relative strength of the output-demand effect and energy substitution effect, sectoral carbon emissions and energy demands will vary across sectors, with increasing, decreasing or moving in a different direction. These results suggest that an incentive mechanism to encourage the widespread use of environment-friendly fuels and technologies will be more effective.

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Paper provided by Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University in its series CCEP Working Papers with number 1202.

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Date of creation: Feb 2012
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Handle: RePEc:een:ccepwp:1202

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  1. Top Three Crawford Working Papers in March 2012
    by David Stern in Stochastic Trend on 2012-04-02 10:14:00
  2. Crawford School Working Papers in February 2012
    by David Stern in Stochastic Trend on 2012-03-02 10:26:00
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Cited by:
  1. Irfanoglu, Zeynep Burcu & Golub, Alla A. & Hertel, Thomas W. & Henderson, Benjamin B., 2012. "Effects of carbon-based border tax adjustments on carbon leakage and competitiveness in livestock sectors," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 125006, Agricultural and Applied Economics Association.
  2. Zhang, Da & Rausch, Sebastian & Karplus, Valerie J. & Zhang, Xiliang, 2013. "Quantifying regional economic impacts of CO2 intensity targets in China," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 687-701.
  3. Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2013. "Carbon-based Border Tax Adjustments and China’s International Trade: Analysis based on a Dynamic Computable General Equilibrium Model," Working Papers, Fondazione Eni Enrico Mattei 2013.17, Fondazione Eni Enrico Mattei.

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