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Carbon-based border tax adjustments and China’s international trade: analysis based on a dynamic computable general equilibrium model

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  • Ling Tang
  • Qin Bao
  • ZhongXiang Zhang
  • Shouyang Wang

Abstract

This paper examines the impacts of the proposed carbon-based border tax adjustments (BTAs) on China’s trade, based on a multi-sector dynamic computable general equilibrium model including 7 energy sectors and 30 non-energy sectors and running up to the year 2030. Distinct from previous single China country models, our model disaggregates foreign accounts of China into four regions, including USA and the EU, to enable to examine the effects of re-routing trade flows. The results suggest that BTAs would have a negative impact on China’s trade. BTAs will directly decrease China’s exports, whereas Chinese exporting enterprises will accordingly modify their strategies. Moreover, BTAs will affect China’s total imports and sectoral import in an indirect but more intricate way. Furthermore, the simulation results for coping policies indicate that enhancing China’s power in world price determination and improving energy technology efficiency will effectively help mitigate the damages caused by BTAs. Copyright Society for Environmental Economics and Policy Studies and Springer Japan 2015

Suggested Citation

  • Ling Tang & Qin Bao & ZhongXiang Zhang & Shouyang Wang, 2015. "Carbon-based border tax adjustments and China’s international trade: analysis based on a dynamic computable general equilibrium model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 329-360, April.
  • Handle: RePEc:spr:envpol:v:17:y:2015:i:2:p:329-360
    DOI: 10.1007/s10018-014-0100-3
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    3. Tang, Ling & Shi, Jiarui & Bao, Qin, 2016. "Designing an emissions trading scheme for China with a dynamic computable general equilibrium model," Energy Policy, Elsevier, vol. 97(C), pages 507-520.
    4. Zhong, Jiarui & Pei, Jiansuo, 2022. "Beggar thy neighbor? On the competitiveness and welfare impacts of the EU's proposed carbon border adjustment mechanism," Energy Policy, Elsevier, vol. 162(C).
    5. Yuanying Chi & Zhengquan Guo & Yuhua Zheng & Xingping Zhang, 2014. "Scenarios Analysis of the Energies’ Consumption and Carbon Emissions in China Based on a Dynamic CGE Model," Sustainability, MDPI, vol. 6(2), pages 1-26, January.
    6. Apokin, Alexander (Апокин, Александр) & Gnidchenko, Andrey (Гнидченко, Андрей) & Sabelnikova, Ekaterina (Сабельникова, Екатерина), 2017. "Import Substitution Potential and Gains from Economic Integration: Disaggregated Estimations [Потенциал Импортозамещения И Выгоды От Экономической Интеграции: Дезагрегированные Оценки]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 44-71, April.
    7. Zhang, Zengkai & Zhu, Kunfu & Hewings, Geoffrey J.D., 2017. "The effects of border-crossing frequencies associated with carbon footprints on border carbon adjustments," Energy Economics, Elsevier, vol. 65(C), pages 105-114.
    8. Fang, Yuan & Yu, Yugang & Shi, Ye & Liu, Jie, 2020. "The effect of carbon tariffs on global emission control: A global supply chain model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    9. Banerjee, Suvajit, 2021. "Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 68-86.
    10. Govinda R. Timilsina & Jing Cao & Mun Ho, 2018. "Carbon Tax For Achieving China’S Ndc: Simulations Of Some Design Features Using A Cge Model," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-17, August.

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    More about this item

    Keywords

    Border carbon tax adjustments; International trade; Dynamic computable general equilibrium model; Technological change; China; D58; F18; Q43; Q48; Q52; Q54; Q56; Q58;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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