Macroeconomic Effects of Co2 Emission Limits : A Computable General Equilibrium Analysis for China

This study analyzes the macroeconomic effects of abating China's CO2 emissions by using a dynamic computable general equilibrium model of the Chinese economy. The baseline scenario for the Chinese economy is first developed. Next, we analyze the economic implications of two less restrictive scenarios under which China's CO2 emissions in 2010 are cut by 20% and 30% relative to the baseline. Then, we calculate the efficiency gains of four indirect tax offset scenarios relative to the two tax retention scenarios. Furthermore, we compare our results with those from GLOBAL 2100 and GREEN. Such a comparison shows that the carbon taxes required in China are much lower than those for both industrialized countries and the world average in order to achieve the same percentage of emission reductions relative to the baseline. This points to opportunities for clean development projects jointly implemented between industrialized countries and China