Study On The Sustainability Of China’s Economic

The Chinese economy has been growing over9%per annum on average forthe last20years. Chinese GDP reached51.9trillion Yuan in2012, makingChina the world’s second largest economy. But Chinese economic growthoften relies on extensive mode of development, causing huge waste of naturalresources and severe damages to the country’s environment.China’s environment deteriorates rapidly, and the pressures on environmentare increasing: the growing burden of population, rapid industrialization andurbanization, spiraling energy consumption. The end result will be rampantproduction of pollutants and the environmental and energy constraints oneconomic growth will be keenly felt. One recent example is the smog thatcovered north and east China for days in January,2013. The toxic substancesin air were20times more than safety standards, severely affected people’sliving, working and health.To solve the environmental and energy constraints on economic growth isthe key to sustainable development. To achieve sustainable development, thegovernment needs to adopt appropriate environment and energy policies inview of China’s current economic status. What kind of impact of theseenvironment and energy policies will have on solving environment and energyproblems, and on sustainable economic development?This dissertation constructs a CGE model based on green GDP socialbudgeting matrix. The model introduces into it environmental feedbackmechanism and establishes relationship between the production activities andthe discharge of sub-standard pollutants. And I analyze the impact ofincreasing taxes on pollutants discharge, subsidies on pollution treatment,levy of energy consumption ad valorem taxes, increasing energy efficiencyand subsidy of technology research on macro economy, energy efficiency andindustrial structure, in addition, the policy impact on achieving balanced development of economy, environment and natural resources andsustainable economic development is also analyzed.Based on numerical simulation, I show that both pollution tax and energytax will have contraction effect on macro economy, and natural resources tax,due to its wider scope of taxation, will have a larger negative effect oneconomy. But taxing energy usage and pollution discharge is an effective wayto save energy and reduce pollution. The contraction effects of energy andpollution taxes will be varying on different industries. Larger impact will beon energy-intensive, pollution-heavy industries, while impact on industrieswhich use less energy and discharge little pollution will be minimal.Increasing pollution treatment investment and subsidies on relatedtechnological patents will bring positive effects throughout the economy. Interms of effect on power-saving and pollution reduction, the impact of the twokinds of subsidy differs. When total output increases, energy consumption andtotal amount of pollution discharge increase relatively less, and unit energyconsumption and pollution discharge of output decreases noticeably, showingvery positive effect. On the other hand, subsidy on pollution treatment andrelated patent investment accrues more benefit to heavy polluters and biginvestors on technological patents, hindering industrial structure optimization.Improved energy efficiency will lead to energy rebound effect. Improvedenergy efficiency lowers energy consumption and pollution discharge of unitoutput, bestowing positive impact on economy; but total energy consumptionand pollution discharge increase. So improved energy efficiency isdetrimental to industrial structure optimization. The industries consuming themost energy will benefit most, and their outputs increase most.My research shows it is difficult to achieve balanced development ofenvironment, economy and energy, and sustainable development by simplyadopting a single policy. It is necessary to take advantages of each policy andadopt a mixture of policies, so as to achieve the target of energy saving andpollution reduction while minimizing the negative impacts on economicdevelopment. For instance, tax policy is very effective for controlling energy consumption and pollution discharge, and subsidies on energy efficiencyand related technological investment will reduce energy consumption andpollution discharge of unit output. Besides, other complementary measures areneeded to reduce energy consumption and pollution, and minimize thenegative impact on economy at the same time, promoting the sustainabledevelopment of economy.