Climate Change Economics

Because free-riding behavior is an inherent characteristic of climate change, how to protect the economic benefits of the emission reduction regions and prompt the noncooperative region to join the emission reduction coalition is particularly important. In this study, we use a global multi-region multi-sector CGE model to compare the impacts of border carbon adjustment (BCA) and two unified tariff mechanisms based on different implementation principles on USA. The results show that the BCA is more effective in reducing carbon leakage in USA than the uniform tariff mechanisms. However, for GDP and welfare losses, the scenario Tariff-carbon-reduction results in greater GDP and welfare losses in USA, which is more conducive to prompting USA to implement carbon reduction policies than the BCA measures. Finally, the sensitivity analysis of carbon price levels and key substitution elasticity further confirmed the results.

The IAM model EMRICES was adopted to analyze the energy and industrial structure trends of the major countries in the world. In the aspect of energy consumption, the energy varieties are subdivided and a random shock model is introduced to depict the declining trend of energy intensity in different sectors. In the aspect of industrial structure, CGE model is used to describe the trend of economic growth. The NDC constraints would affect the total economic output and energy consumption of various industries according to the emission reduction cost function in EMRICES. The results show that the global temperature would be 2.61^∘C by 2100 under NDC constraints, and it is still unable to achieve the target of 2^∘C warming. The global carbon emission mitigation should be paid to more attention. In terms of energy consumption, the proportion of nonfossil energy and natural gas consumption will be greatly increased. The change of industrial competitive advantage represented by location quotient shows that China’s manufacturing competitiveness will decline, but its relative concentration and specialization level are still higher than the global average level. India’s manufacturing development will improve. In the financial sector, the United States would still be the leader.

Emission trading could increase the production cost of sectors, and thus has significant impacts on sectoral competitiveness. This study takes the Beijing–Tianjin–Hebei (BTH) region as an example to explore the impacts of different carbon market linkage scenarios on regional sectoral competitiveness by using the CEECPA model, a static multi-region and multi-sector Computable General Equilibrium (CGE) model in China. Results show that carbon market linkage can mitigate the adverse impacts of emission trading on regional sectoral competitiveness across the BTH region. However, carbon market linkage may lead to the imbalances of regional sectoral competitiveness. In particular, energy production and energy-intensive sectors in Hebei would experience higher sectoral competitive losses under the restricted linkage scenario. Revenue recycling can effectively reduce sectoral competitive losses from carbon market linkage. Especially, using revenues to deduct indirect tax can make the sectoral competitive losses in Hebei significantly decrease. Policy implications are proposed to facilitate emission mitigation and balanced industrial development in China.

In recognition of the negative climate change and deteriorative air quality, the iron and steel industry in China was subject to production capacity phase-out policy (PCPP), which is deeply influencing industrial restructuring and national emission reduction targets. However, researches that quantitatively estimated the comprehensive impacts of such structural adjustment policy remain scant. For this purpose, this study expands and soft-links between GAINS and IMED models to characterize the impacts of climate change and PM${}_{2.5}$-attributed health co-benefits. Results showed the PCPP based on scale limitation to eliminate backward capacities in the Beijing-Tianjin-Hebei region yields total benefits of 34.9 billion Yuan (4.2 billion USD), 89% of total coming from energy saving and carbon mitigation, more than policy costs (20.0 billion Yuan) in 2020, but the gap between benefit-cost will keep narrowing to $-$2.8 billion Yuan ($-$0.3 billion USD) in 2020–2030, indicating that policy improvement is needed in the long run. To further increase policy co-benefits and achieve multiple policy targets, the policymaker should readjust the PCPP by switching scale limitation to energy efficiency constraint. If doing that, the difference of benefit-cost will achieve 42.5 billion Yuan (5.1 billion USD). The regional disparity also exits due to the diverse ratio of benefit-cost in the selected provinces, calling for necessary fiscal incentives to the less developed area, e.g., Hebei, to promote closer integration.

An energy supply dominated by the use of fossil fuels causes both climate change and air pollution, which have negative impacts on human capital via both health and productivity. In addition, different people are affected differently because of factors such as age, gender and education level. To enhance the understanding of the benefits of low carbon transition from the labor supply perspective and help to identify strategies of collaborative control for CO₂ and local air pollutants in China, an integrated assessment model linking the air quality module and the health impact module with a disaggregated labor sector computable general equilibrium (CGE) economic system is developed and applied in this study. Results show some key findings. First, renewable energy development and carbon capture and storage (CCS) technologies will contribute significantly to GDP in terms of their impact on air quality improvement by 0.99% and 0.54%, respectively, in 2050. Second, due to differences in labor composition, air pollution has, and will continue to have, the greatest impact on sectors with a higher proportion of male and lower-educated workers — such as the coal sector, and it will have the least impact on sectors with a higher proportion of female and higher-educated workers — such as the public administration sector. Third, the different impacts of sector output will increase economic inequality.

Highlights

• •The economic impact of climate change and air pollution is assessed.
• •A CGE model with disaggregated labor sectors is developed.
• •The secondary industry is most affected by pollution from a health perspective.
• •Low-income groups suffer the largest loss of income due to pollution.
• •A low carbon policy will improve air quality and economic equity.

Climate policies can bring local air quality and health co-benefits, which may partially or entirely offset the costs of implementing these policies. In this study, we introduce an integrated health co-benefits assessment model, the Regional Emissions-Air quality-Climate-Health (REACH) Modeling Framework, which is capable of evaluating the impact of policies on air pollution-related mortality and morbidity in the whole economic system overtime at the provincial level for China. We first provide a detailed description of the modeling framework and conduct a case study to estimate the health benefits of different climate policy scenarios. We show that a scenario consistent with the 2^∘C target that peaks China’s emissions before 2025 could avoid around 190 thousand premature deaths in 2030. The health benefits could partially or fully cover the policy costs under different assumptions of the value of a statistical life (VSL). Our framework also illustrates that estimated costs and health benefits distribute unevenly across regions in China.

Integrated assessment models (IAMs) have been widely used to inform policymaking on climate change. However, few Chinese IAMs have merely been involved in international model comparison. In this study, we develop an IAM, namely, CGEM-IAM, by coupling a global recursive dynamic CGE model with a simple climate model and establishing a climate impact assessment module based on a system of indirect damage functions. By using the CGEM-IAM, we analyze economic losses due to climate impacts under various scenarios. Results reveal that under the baseline scenario, the global annual loss due to climate change will reach $1628 billion (constant 2011 USD) in 2050, which represents approximately 0.79% of the global GDP in that year. The achievement of current commitments by countries promotes the slight reduction of the annual economic losses to $1398 billion in 2050. Under the 2-degree scenario, approximately 50% of the economic losses could be avoided. Developing countries and regions are vulnerable to the negative impact of climate change and could suffer from 85% of global economic losses, whereas China accounts for approximately 1% of global total climate impacts. Although the climate damage estimated by CGEM-IAM is comparable with the IAMs DICE and FUND models at the aggregate level, they are inconsistent at the sector distribution. Therefore, additional efforts should compare multiple models at the regional and sectoral levels in detail.

In 2019, the National Carbon Emission Trading Scheme (ETS) of China’s power generation industry was officially launched, and the free allocation and benchmark are the primary ways for allowance allocation in the first phase of the national ETS. The carbon allowance allocation method is the basis for the effective operation of the ETS. In order to evaluate China’s carbon allowance allocation method published by policy, we constructed a selection model of the effective benchmark and combined with three different scenarios such as no generation-right trading market, incomplete generation-right trading market and complete generation-right trading market to simulate the operation of the national ETS in China’s power generation industry. The study shows that: (1) according to the current benchmark value published by policy, the carbon allowance supply will exceed demand in all scenarios. (2) Regardless of the scenario, in order to balance the supply and demand of allowance in the ETS, the effective benchmark value should be adjusted to 35th–50th quantile of the carbon emissions per unit power generation.

The problems of excessive CO₂ emissions and global warming caused by human activities are becoming more serious. Carbon Tax (CT) and Emission Trading Scheme (ETS) are popular emission mitigation mechanisms. This paper establishes four counter-factual (CF) scenarios with different CT rate, and constructs a dynamic recursive computable general equilibrium (CGE) model, named China Energy-Environment-Economy Analysis (CEEEA) model, to study the impact of different CT rate on the economy, energy and environment. The results indicate that if CT complement ETS, and the cap of ETS is based on grandfathering method, the carbon trading price will reduce due to the changes in carbon allowances demand and supply. CT can share the mitigation pressure from ETS coverages into non-ETS coverages. When CT complement ETS but nothing is changed in mechanism of emission trading, the total emission mitigation effect will reduce slightly but the mitigation cost will reduce significantly. All in all, using CT as the supplement is a good mitigation strategy to release Gross Domestic Product (GDP) loss. But if we want to get more mitigation effect, rising CT rate or a stricter carbon cap may help.