Climate policy and China's external balances

Shuang Zheng, Xiaohui Liu and Yue Gu

Emerging Markets Review, 2024, vol. 63, issue C

Abstract: To explore the impact of the China Carbon Emissions Trading Exchange (CCETE) on international trade and capital flow, we develop a two-country dynamic general equilibrium model with asymmetric climate policies. We use targets of decreasing carbon emissions intensity to simulate the strengthening of the CCETE policy. We find that the strengthening of climate policy improves China's trade balance and current account. We also find that output and carbon emissions of the rest of the world with a less stringent climate policy increase (known as carbon leakage) in the short run, but decrease (known as positive externalities of climate policy) in the long run. These findings suggest that China could benefit from more stringent climate policy due to the improvement of its external balances, and the world could also benefit due to the mitigation of climate change.

Keywords: Climate policy; Trade balance; Current account; External balances; Carbon emissions intensity (search for similar items in EconPapers)
JEL-codes: F18 F32 Q5 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014124001110
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:63:y:2024:i:c:s1566014124001110

DOI: 10.1016/j.ememar.2024.101216

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().