Assessing economic impacts of China’s water pollution mitigation measures through a dynamic computable general equilibrium analysis

Abstract

In this letter, we apply an extended environmental dynamic computablegeneral equilibrium model to assess the economic consequences ofimplementing a total emission control policy. On the basis of emissionlevels in 2007, we simulate different emission reduction scenarios,ranging from 20 to 50% emission reduction, up to the year 2020. Theresults indicate that a modest total emission reduction target in 2020can be achieved at low macroeconomic cost. As the stringency of policytargets increases, the macroeconomic cost will increase at a rate fasterthan linear. Implementation of a tradable emission permit system cancounterbalance the economic costs affecting the gross domestic productand welfare. We also find that a stringent environmental policy can leadto an important shift in production, consumption and trade patterns fromdirty sectors to relatively clean sectors.