Macroeconomic Effects of CO2 Emission Limits: A Computable General Equilibrium Analysis for China.

The paper analyzes the macroeconomic effects of limiting China's CO2 emissions by using a time-recursive dynamic computable general equilibrium (CGE) model of the Chinese economy. The baseline scenario for the Chinese economy over the period to 2010 is first developed under a set of assumptions about the exogenous variables. Next, we analyze the macroeconomic implications of two less restrictive scenarios under which China's CO2 emissions in 2010 will be cut by 20% and 30% respectively relative to the baseline, assuming that carbon tax revenues are retained by the government. Then, we compute the efficiency improvement of four indirect tax offset scenarios relative to the two tax retention scenarios above. Furthermore, a comparison with other studies for China, which include the well-known global studies based on GLOBAL 2100 and GREEN, is made in terms of both the baseline scenarios and carbon constraint ones. The paper ends with some concluding remarks.