Impacts Of Energy And Environment Policies On China Based On A Dynamic Computable General Equilibrium Model

To solve the double challenges of energy shortage and environment pollution, the Chinese government has proposed a series of energy and environment policies. Amongst them, coal resource tax reform and carbon emissions trading scheme (ETS) have aroused a wild interest. This paper builds a multi-sectoral dynamic computable general equilibrium (CGE) model. By introducing resource tax module and ETS module into the proposed model, we explore the economic and environmental impacts of the two policies on China and make some policy implications to government.Coal resource tax reform has been raised by the government in 2014. By introducing a novel resource tax module into typical CGE model, we describe the collection method and tax rate of the resource tax policy in detail. As for the coal resource tax reform from quantity-based collection to ad valorem collection:(1) The reform policy would have a negative effect on the Chinese economy, and such effect would increase with a higher tax rate but decrease gradually as the time goes. (2) The energy structure would be improved by the reform policy, with a sharp decrease in coal consumption but increases in the consumptions of cleaner energy forms. (3) The total emissions of CO2 and other air pollutants would be significantly mitigated, which can effectively improve China's environment.A nationwide ETS will be constructed in 2016. By building an ETS-based CGE model, this paper carefully describes the different policy designs in ETS. Based on the simulation results, some conclusions could be found:(1) The ETS policy appears a market-driven cost-effective mitigation effect in China in terms of a relative large mitigation effect and small economic loss. (2) The carbon cap tightening at a reduction rate between 2.48% and 3.68% is strongly recommended, to both meet China's Copenhagen pledge. (3) Various ETS sub-policies should be carefully design to balance the economic growth and mitigation effect:a larger share of free permits, the grandfathering rule, a lower penalty price and a sufficient subsidy are strongly recommended at the beginning stage to avoid a heavy economic damage, while in the later stages when sectors have got preparations to the ETS policy, these designs can be adjusted to guarantee an effective curb on carbon emissions and intensity.