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“Co-benefits” of Greenhouse Gas Mitigation Policies in China: An Integrated Top-Down and Bottom-Up Modeling Analysis

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  • Cao, Jing
  • Ho, Mun
  • Jorgenson, Dale

Abstract

Many greenhouse gas mitigation policies that shift fossil fuel use are accompanied by some hidden environmental benefits, so called “co-benefits” or “ancillary benefits.” Since these “co-benefits” are often overlooked by government policy makers, there tends to be a bias in the policy analysis of various environmental policies and government strategies on global warming. To achieve a plausible estimate of the magnitude of these co-benefits of potential carbon reduction policies in China, this paper applied an integrated modeling approach by combining a top-down recursive dynamic CGE (computable general equilibrium) model with a bottom-up electricity sector model, to simulate three macro-level environmental tax policies: output tax, fuel tax, and carbon tax, as well as national-sectoral mixed policies (a national tax policy with emission caps in the electricity sector). Based on the integrated model simulations, the estimated ancillary health benefits from the three taxes are quite significant. Under the revenue neutrality condition, it is very likely that China would obtain a “win-win” solution with respect to carbon mitigation, especially if these co-benefits are included in the policy-making cost-benefit analysis. The integrated modeling approach also provides a useful way to examine a complicated mixed policy, such as a national tax policy combined with sectoral-level emission cap policies. In order to achieve both objectives regarding local co-benefits and induce technology change, this model suggests that the preferred policy for China is either a national level fuel tax or carbon tax imposed at the national level with carbon emission caps in the electricity sector.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-08-10-efd.

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Date of creation: 02 May 2008
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Handle: RePEc:rff:dpaper:dp-08-10-efd

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Keywords: Co-benefits; climate change; CGE model; bottom-up model; top-down model;

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References

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  1. Koopmans, Carl C. & te Velde, Dirk Willem, 2001. "Bridging the energy efficiency gap: using bottom-up information in a top-down energy demand model," Energy Economics, Elsevier, vol. 23(1), pages 57-75, January.
  2. Gielen, Dolf & Changhong, Chen, 2001. "The CO2 emission reduction benefits of Chinese energy policies and environmental policies:: A case study for Shanghai, period 1995-2020," Ecological Economics, Elsevier, vol. 39(2), pages 257-270, November.
  3. Burtraw, Dallas & Palmer, Karen, 1996. "Electricity Restructuring and Regional Air Pollution," Discussion Papers dp-96-17, Resources For the Future.
  4. David O’Connor & Fan Zhai & Kristin Aunan & Terje Berntsen & Haakon Vennemo, 2003. "Agricultural and Human Health Impacts of Climate Policy in China: A General Equilibrium Analysis with Special Reference to Guangdong," OECD Development Centre Working Papers 206, OECD Publishing.
  5. Sébastien Dessus & David O'Connor, 2003. "Climate Policy without Tears CGE-Based Ancillary Benefits Estimates for Chile," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(3), pages 287-317, July.
  6. McFarland, J. R. & Reilly, J. M. & Herzog, H. J., 2004. "Representing energy technologies in top-down economic models using bottom-up information," Energy Economics, Elsevier, vol. 26(4), pages 685-707, July.
  7. Burtraw, Dallas & Krupnick, Alan & Palmer, Karen & Paul, Anthony & Toman, Michael & Bloyd, Cary, 2003. "Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 650-673, May.
  8. Boyd Roy & Krutilla Kerry & Viscusi W. Kip, 1995. "Energy Taxation as a Policy Instrument to Reduce CO2 Emissions: A Net Benefit Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 1-24, July.
  9. Klinge Jacobsen, Henrik, 1998. "Integrating the bottom-up and top-down approach to energy-economy modelling: the case of Denmark," Energy Economics, Elsevier, vol. 20(4), pages 443-461, September.
  10. Wilson, Deborah & Swisher, Joel, 1993. "Exploring the gap : Top-down versus bottom-up analyses of the cost of mitigating global warming," Energy Policy, Elsevier, vol. 21(3), pages 249-263, March.
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Cited by:
  1. Muller, Nicholas Z., 2012. "The design of optimal climate policy with air pollution co-benefits," Resource and Energy Economics, Elsevier, vol. 34(4), pages 696-722.

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