Analyzing Taiwan’s Air Pollution: An Application of the CGE Model and the Concept of Green National Product

Yun-Peng Chu, Shih-Mo Lin and Ching-Wei Kuo

No 331059, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The purposes of this paper are to establish a link between the concept of green national product and that of CGE modeling, and demonstrate empirically the existence of significant differences between the value of conventional GNP and that of Green GNP. We first derive theoretically the framework of Green GNP under two different definitions, SEEA and ENRAP, taking into account pollution and pollution prevention activities. Then, we employ a 28-sector static CGE model for Taiwan to assess the effects of the policy of mandatory reduction in air pollution emission on Taiwan’s macroeconomic variables as well as sectoral resource allocation. The social accounting matrix used by the CGE model is compiled on the basis of the 1997 national income data (aggregates) and 1996 input-output data (structure). The model is then supplemented by the pollution generation coefficients, the emission coefficients and the abatement costs, which are computed from the Trial Compilation of Green National Product prepared by the Directorate-General of Budgeting, Accounting, and Statistics (DGBAS). Three kinds of air pollutants are considered: Sulfur Oxides (SOx), Nitrogen Oxides (NOx), and Volatile Organic Compounds (VOC). Simulation results generated from the model are used to compute two measures of Green National Product, the EDPII under the United Nations?SEEA system, and an alternative measure, which is derivable from maximizing the present value of future consumption stream and is closer to the ENRAP system, in addition to the conventional GNP and other macroeconomic and sectoral variables. It is found that although a more stringent air pollution control policy will raise costs and thereby reduce the conventional GNP, the Green National Product, which reflects social welfare better than the conventional GNP does, will increase by either measure. Sectorally, industries with heavier air pollution generations tend to lose resources to the other sectors, as expected.

Keywords: Environmental Economics and Policy; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 45
Date: 2002
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