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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

No 120044, Climate Change and Sustainable Development from Fondazione Eni Enrico Mattei (FEEM)

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: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 53
Date: 2011-12
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https://ageconsearch.umn.edu/record/120044/files/NDL2011-093.pdf (application/pdf)

Related works:
Journal Article: Impacts of border carbon adjustments on China's sectoral emissions: Simulations with a dynamic computable general equilibrium model (2013) Downloads
Working Paper: Impacts of Border Carbon Adjustments on China's Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model (2012) Downloads
Working Paper: Impacts of Border Carbon Adjustments on China’s Sectoral Emissions: Simulations with a Dynamic Computable General Equilibrium Model (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemcl:120044

DOI: 10.22004/ag.econ.120044

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