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

53 Pages Posted: 25 Jan 2012

See all articles by Qin Bao

Qin Bao

Chinese Academy of Sciences (CAS) - Institute of Systems Science, Academy of Mathematics and Systems Science

Ling Tang

affiliation not provided to SSRN

ZhongXiang Zhang

Tianjin University - Ma Yinchu School of Economics

Han Qiao

University of Chinese Academy of Sceinces

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences

Date Written: January 23, 2012

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 China's 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.

Keywords: Border Carbon Tax Adjustments, Computable General Equilibrium Model, Carbon Emissions

JEL Classification: D58, F18, Q43, Q48, Q52, Q54, Q56, Q58

Suggested Citation

Bao, Qin and Tang, Ling and Zhang, ZhongXiang and Qiao, Han and Wang, Shouyang, Impacts of Border Carbon Adjustments on China's Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model (January 23, 2012). FEEM Working Paper No. 93.2011. Available at SSRN: https://ssrn.com/abstract=1990237 or http://dx.doi.org/10.2139/ssrn.1990237

Qin Bao

Chinese Academy of Sciences (CAS) - Institute of Systems Science, Academy of Mathematics and Systems Science ( email )

52 Sanlihe Rd.
Datun Road, Anwai
Beijing, Xicheng District 100864
China

Ling Tang

affiliation not provided to SSRN ( email )

ZhongXiang Zhang (Contact Author)

Tianjin University - Ma Yinchu School of Economics ( email )

92 Weijin Road, Nankai District
Tianjin 300072
China
+86 22 87370560 (Phone)

HOME PAGE: http://ideas.repec.org/f/pzh243.html

Han Qiao

University of Chinese Academy of Sceinces ( email )

80 Zhong-Guan-Cun East Road
No. 7 Building, Office 306
Beijing, Beijing 100190
China
+86-10-82680917 (Phone)

HOME PAGE: http://mscas-en.ucas.ac.cn/index.php/res/div/1138-qiao-han

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences ( email )

China

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