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The regional economic effects of a reduction in carbon emissions and an evaluation of offsetting policies in China

Author

Listed:
  • Chen, Anping
  • Groenewold, Nicolaas

Abstract

China has promised large cuts in CO2 emissions by 2020, which is likely to have differential effects across regions. We know little about the regional effects of pollution reduction. We make a contribution to filling this gap using a small theoretical model with two regions, features of the Chinese economy and the right to emit CO2 as a factor of production. We find regionally differentiated effects on income, welfare and output and explore government policies designed to reduce these effects. The effects of fiscal policies depend crucially on whether one or both regions respond and on whether output or welfare is targeted. Boosts to productive capacity do better in terms of output but not welfare.

Suggested Citation

Handle: RePEc:eee:paresc:v:93:y:2014:i:2:p:429-454
DOI: 10.1111/pirs.12024
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JEL classification:

  • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
  • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
  • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
  • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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