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Benefits and costs to China of a climate policy

Published online by Cambridge University Press:  15 June 2007

KRISTIN AUNAN ,
TERJE BERNTSEN ,
DAVID O'CONNOR ,
THERESE HINDMAN PERSSON ,
HAAKON VENNEMO  and
FAN ZHAI
KRISTIN AUNAN
Affiliation:
CICERO Centre for Climate and Environmental Research, Norway.
TERJE BERNTSEN
Affiliation:
CICERO Centre for Climate and Environmental Research, Norway.
DAVID O'CONNOR
Affiliation:
UN DESA, Division for Sustainable Development, Department of Economic and Social Affairs, New York, USA.
THERESE HINDMAN PERSSON
Affiliation:
ECON Analysis, Norway.
HAAKON VENNEMO
Affiliation:
ECON Analysis, Norway.
FAN ZHAI
Affiliation:
Asian Development Bank, Philippines.
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Abstract

In future agreements to cut greenhouse gases, a Chinese commitment will probably be essential. Committing for China is easier if the cost is low and the benefit to China is high. Using a new CGE-model of the Chinese economy we discuss the cost and benefit to China of taking on a climate commitment. We argue that a climate commitment gives significant ancillary benefits to China since associated particle and NOx-reductions improve public health and increase agricultural yields. The model of impact on agricultural yields is a novel feature of CGE-models. Comparing benefits to economic costs produces striking results. We find that China may reduce its CO2-emissions by 17.5 per cent without suffering a welfare loss. Half of the benefit originates in the novel agricultural model. We also discuss the distributional impact of a climate commitment. In general the distributional impact is not averse.

Type
Research Article
Information
Environment and Development Economics , Volume 12 , Issue 3 , June 2007 , pp. 471 - 497
Copyright
© 2007 Cambridge University Press

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Footnotes

The authors would like to thank the Government of Switzerland and the Office of the Deputy Secretary General (DSG) of the OECD, and, in particular, the former DSG, Thorvald Moe, for providing financial support for this study. Fan Zhai would like to thank the Development Research Center of the State Council, People's Republic of China, for its support and encouragement. Aunan, Persson, and Vennemo would like to thank the Norwegian Research Council and the Norwegian Ministry of Foreign Affairs. We would also like to thank our colleagues, Maurizio Bussolo of the OECD Development Centre and Sébastien Dessus of the World Bank, for their valuable inputs on various aspects of the economic modelling work for this study, Richard Garbaccio, Mun Ho, and Gordon Hughes for sharing information on their own economic and environmental models, and Jan Corfee-Morlot of the OECD Environment Directorate, Hans Martin Seip of the University of Oslo and four referees for insightful comments. The usual disclaimers apply. Authors are in alphabetical order.