Benefits and costs to China of a climate policy

Kristin Aunan, Terje Berntsen, David O'Connor, Therese Hindman Persson, Haakon Vennemo and Fan Zhai

Environment and Development Economics, 2007, vol. 12, issue 3, 471-497

Abstract: In future agreements to cut greenhouse gases, a Chinese commitment will probably be essential. Committing for China is easier if the cost is low and the benefit to China is high. Using a new CGE-model of the Chinese economy we discuss the cost and benefit to China of taking on a climate commitment. We argue that a climate commitment gives significant ancillary benefits to China since associated particle and NOx-reductions improve public health and increase agricultural yields. The model of impact on agricultural yields is a novel feature of CGE-models. Comparing benefits to economic costs produces striking results. We find that China may reduce its CO2-emissions by 17.5 per cent without suffering a welfare loss. Half of the benefit originates in the novel agricultural model. We also discuss the distributional impact of a climate commitment. In general the distributional impact is not averse.

Date: 2007
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