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

Qin Bao, Ling Tang, ZhongXiang Zhang, Han Qiao and Shouyang Wang
Additional contact information
Qin Bao: Academy of Sciences, Beijing, China
Ling Tang: Institute of Policy and Management, Chinese Academy of Sciences, Beijing, China
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

CCEP Working Papers from Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University

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.

JEL-codes: D58 F18 Q43 Q48 Q5 Q52 Q54 Q58 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-cmp, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Impacts of border carbon adjustments on China's sectoral emissions: Simulations with a dynamic computable general equilibrium model (2013)
Working Paper: Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model (2011)
Working Paper: Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model (2011)
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