An analysis of China's climate policy using the China-in-Global Energy Model

The primary approach to address climate change in China has been the use of CO₂ intensity targets coupled with targets for low carbon energy deployment. We evaluate the impact of extending similar targets through 2050 on China's energy use profile and CO₂ emissions trajectory using the China-in-Global Energy Model (C-GEM). The C-GEM is a global computable equilibrium model that includes energy and economic data provided by China's statistical agencies, calibration of savings, labor productivity, and capital productivity dynamics specific to China's stage of development, and regional aggregation that resolves China's major trading partners. We analyze the combined impact of extending CO₂ intensity targets, implemented via a cap-and-trade program, and low carbon energy policies (directives for nuclear power expansion and feed-in tariffs for wind, solar, and biomass energy) through 2050. Although with the policy, simulated CO₂ emissions are around 43% lower in 2050 relative to a reference (No Policy) counterfactual, China's CO₂ emissions still increase by over 60% between 2010 and 2050. Curbing the rise in China's CO₂ emissions will require fully implementing a CO₂ price, which will need to rise to levels higher than $25/ton in order to achieve China's stated goal of peaking CO₂ emissions by 2030.     

Does energy‐related aid affect emissions? Evidence from a global dataset

Donor countries have been using international aid in the field of energy for at least three decades. The stated objective of this policy is to reduce emissions and promote sustainable development in the global South. In spite of the widespread use of this policy tool, very little is known about its effect on emissions. In this paper we perform an empirical audit of the effectiveness of energy‐related aid in tackling CO₂ and SO₂ emissions. Using a global panel dataset covering 128 countries over the period 1971–2011 and estimating a parsimonious model using the Anderson and Hsiao estimator, we do not find any evidence of a systematic effect of energy‐related aid on emissions. We also find that the non‐effect is not conditional on institutional quality or level of income. Countries located in Europe and Central Asia do better than others in utilizing this aid to reduce CO₂ emissions. Our results are robust after controlling for the environmental Kuznets curve, country fixed effects, country‐specific trends, and time‐varying common shocks.     

Lifestyles, technology and CO2 emissions in China: A regional comparative analysis

With rapid economic development, higher income levels, urbanization and other socio-economic drivers, people's lifestyles in China have changed remarkably over the last 50 years. This paper uses the IPAT model (where I = Impact representing CO₂ emissions, P = Population, A = Affluence, and T = emission intensity) to analyze how these main drivers contributed to the growth of CO₂ emissions over this time period. Affluence or lifestyle change has been variously recognized as one of the key factors contributing to CO₂ emissions. Through comparative analysis of the development of five regions in China, we trace lifestyle changes since the foundation of the People's Republic of China (PRC) in 1949 until 2002. We find that household consumption across the five regions follows similar trajectories, driven by changes in income and the increasing availability of goods and services, although significant differences still exist between and within regions due to differential policies in China and different possibilities for social mobility. There are considerable differences between the southeast and northwest and between urban and rural areas. We also found that technological improvements have not been able to fully compensate for the increase of emissions due to population growth and increasing wealth, which is also in line with results from other studies. Finally, this paper emphasizes that developing countries such as China, which is home to 22% of the world population and a growing middle class, and which is on a fast track to modernization, need to ensure that people's lifestyles are changing towards more sustainable ways of living. China has been investing heavily in infrastructure and thus creating the emissions of tomorrow. Thus investing, for example, in public transport and low energy building today will help reduce emissions in the future and will support more sustainable lifestyles.     

Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis

This study deals with the question whether financial development reduces CO₂ emissions or not in case of Malaysia. For this purpose, we apply the bounds testing approach to cointegration between the variables. We establish the presence of significant long-run relationships between CO₂ emissions, financial development, energy consumption and economic growth. The empirical evidence also indicates that financial development reduces CO₂ emissions. Energy consumption and economic growth add in CO₂ emissions. The Granger causality analysis reveals the feedback hypothesis between financial development and CO₂ emissions, energy consumption and CO₂ emissions and, between CO₂ emissions and economic growth.     

Input-output analysis of carbon emissions embodied in China-Japan trade

Energy-related CO₂ emissions embodied in international trade have been widely studied by researchers all over the world. By using the bilateral trade input–output (BTIO) approach, this study investigates the CO₂ emissions embodied in China–Japan trade during 1995–2009 and attempts to identify the driving forces for the change in CO₂ emissions embodied in China’s exports to Japan during that period by using structural decomposition analysis (SDA). Result shows that CO₂ emissions embodied in China’s exports increased by about 100% from 1995 to 2009, whereas those embodied in China’s imports increased by about 500% during the same period. Result of this research also reveals that the scale effect had a large influence on the increase in CO₂ emissions embodied in China–Japan trade. The technical effect greatly decreased CO₂ emissions embodied in China’s exports to Japan, but obviously increased those embodied in imports. The influence of the structural effect was relatively small and insignificant in the change of CO₂ emissions embodied in China’s exports to Japan, but was notable in the change of emissions embodied in imports.     

Global resilience to climate change: Examining global economic and environmental performance resulting from a global carbon dioxide market

In this study, we investigated global economic and environmental resilience in the presence of climate change. In particular, we examine the possibility of mitigating carbon dioxide (CO₂) emissions without stressing standards of living. Here, we set up a cross-country CO₂ market constrained by a quota, where CO₂ is optimally re-allocated based on relative shadow prices of the pollutant. The objective is to stabilize global emissions without hindering global incomes and in the process achieve a single CO₂ price. We introduce a re-allocation model that takes into account each country’s underlying polluting technology. The model solutions are then used to investigate whether a single, global price for CO₂ is attainable. Our results suggest that global CO₂ emissions could stabilize without stressing global incomes, with a global CO₂ market achieving equilibrium. With a CO₂ market, countries would then have the incentive to consider adopting, improving, or investing in additional abatement technologies to move beyond current capabilities, while continuing to increase standards of living.     

The effectiveness of anti-leakage policies in the European Union: results for Austria

With the third trading period of the EU emissions trading scheme (EU ETS) starting in 2013, the system of allocating emission allowances will significantly change: In contrast to the previous two trading periods, auctioning of the allowances should now be the rule rather than the exception. Accompanying this policy change, concerns over competitiveness of energy intensive, trade exposed sectors as well as over limited environmental effectiveness via the channel of carbon leakage, have regained prominence. In this paper, we thus explore the impacts of potential EU policies to counter losses in international competitiveness and carbon leakage from the perspective of Austria. Based on numerical simulations with a computable general equilibrium model, we evaluate three policy options: an input subsidy for carbon allowances (thus reflecting the planned partially free allocation mechanism in the third EU ETS phase), a subsidy for domestic production, and an export rebate based on sectoral CO₂ costs. Our results show that each policy has the potential to support domestic production in exposed sectors relative to a full auctioning scenario and thus increase competitiveness. However, none is imperatively effective at reducing Austria’s net carbon emissions: while the carbon trade balance is improved and hence leakage declines, the tradability of emission permits within the EU ETS allows CO₂ emissions from Austria’s ETS output to increase. A cost benefit analysis indicates that the two policies promoting domestic output and exports are more cost effective than the CO₂ input subsidy.     

The carbon footprint of UK households 1990-2004: A socio-economically disaggregated, quasi-multi-regional input-output model

This paper presents a socio-economically disaggregated framework for attributing CO₂ emissions to people's high level functional needs. Based around a quasi-multi-regional input-output (QMRIO) model, the study, in theory, takes into account all CO₂ emissions that arise from energy used in production of goods and services to satisfy UK household demand, whether the emissions occur in the UK or abroad. Results show that CO₂ emissions attributable to households were 15% above 1990 levels in 2004, and that although absolute decoupling occurred between household expenditure and CO₂ during the UK's switch from coal to gas in the early 1990s, since then only slight relative decoupling is evident. The proportion of CO₂ that arises outside UK borders in support of UK consumption is rising, and reducing these emissions is particularly problematic in a global trading system. Investigation into the carbon footprint of different segments of the UK population shows wide variation: the segment with the highest carbon footprint emits 64% more CO₂ than the segment with the lowest. Results show that recreation and leisure are responsible for over one quarter of CO₂ emissions in a typical UK household in 2004. We conclude that expanding lifestyle aspirations are significant factors in driving household CO₂ emissions, but the study also emphasizes that attention must be paid to the infrastructures and institutions that result in considerable amounts of CO₂ being locked up in basic household activities through which people meet their everyday needs for subsistence, protection, and communication with family and friends. The findings highlight the sheer scale of the challenge facing UK policy-makers, and suggest that policies should be targeted towards segments of society responsible for the highest carbon footprints.     

Norwegian Emissions of CO2 1987–1994 A Study of Some Effects of the CO2 Tax

Several countries have introduced taxes on fossil fuels with the aim of reducing atmospheric emissions, partly because of local environmental goals (SO₂, NO_x) and partly to participate in a global effort to reduce emissions of greenhouse gases. Many macroeconomic studies, based on both global and national models, have been made of how emissions can be reduced with the help of taxes and the consequent reduction in GDP following the introduction of such taxes. Norway has had a CO₂ tax for five years, thereby providing a unique opportunity to evaluate the effects of this tax on emissions. The paper provides a counterfactual analysis of energy consumption and emissions if no CO₂ taxes had been introduced, compared with the actual situation in which such taxes exist. The effect of a CO₂ tax on oil consumption, and thus CO₂ emissions is studied on the basis of partial economic models for various sectors of the Norwegian economy. The study indicates that the CO₂ tax has had an impact on CO₂ emissions in Norway.     

Quantification of the environmental impacts of road conditions in Brazil

This study evaluates the impacts of Brazilian highway conditions on fuel consumption and, consequently, on carbon dioxide (CO₂) emissions. For the purpose of this study, highway conditions refer to the level of highway maintenance: the incidence of large potholes, large surface cracks, uneven sections, and debris. Primary computer collected data related to the fuel consumption of three types of trucks were analyzed. The data were derived from 88 trips taken over six routes, each route representative of one of two highway conditions: better or worse. Study results are initially presented for each type of truck being monitored. The results are then aggregated to approximate the entire Brazilian highway network. In all cases, results confirmed environmental benefits resulting from travel over the better routes. There was found to be an increase in energy efficiency from traveling better roads, which resulted in lower fuel consumption and lower CO₂ emissions. Statistical analysis of the results suggests that, in general, fuel consumption data were significant at *P < 0.05, rejecting the null hypothesis that average fuel consumption from traveling the better routes is statistically equal to average fuel consumption from traveling the worse routes. Improved Brazilian road conditions would generate economic benefits, reduce dependency on and consumption of fossil fuels (due to the increase in energy efficiency), and reduce CO₂ emissions. These findings may have additional relevancy if Brazil needs to reduce carbon dioxide emissions to reach future Kyoto Protocol's emissions targets, which should take effect in January 2013.     

CO2 emissions in Australia: economic and non-economic drivers in the long-run

Australia has sustained a relatively high economic growth rate since the 1980s compared to other developed countries. Per capita CO₂ emissions tend to be highest amongst OECD countries, creating new challenges to cut back emissions towards international standards. This research explores the long-run dynamics of CO₂ emissions, economic and population growth along with the effects of globalization tested as contributing factors. We find economic growth is not emission-intensive in Australia, while energy consumption is emissions intensive. Second, in an environment of increasing population, our findings suggest Australia needs to be energy efficient at the household level, creating appropriate infrastructure for sustainable population growth. High population growth and open migration policy can be detrimental in reducing CO₂ emissions. Finally, we establish globalized environment has been conducive in combating emissions. In this respect, we establish the beneficial effect of economic globalization compared to social and political dimensions of globalization in curbing emissions.     

Is high-speed rail heading towards a low-carbon industry? Evidence from a quasi-natural experiment in China

Existing studies have investigated the environmental dividends of substituting high-speed rail (HSR) for other energy-intensive vehicles from an engineering standpoint, but they have yet to explore the economic effects of HSR and the associated carbon emissions reduction benefits. To fill the research gap, we use panel data from 285 Chinese cities between 2004 and 2014, and employ a spatial difference-in-differences model to empirically examine the impact of HSR opening on industrial CO₂ emissions. After controlling for spillover effects from neighboring HSR cities, our results show that cities offering HSR services significantly reduce their own industrial CO₂ emissions. This finding is robust and is unaffected by outliers, control group selection, time trends, geography and expectation factors, or endogeneity. The mechanism test reveals that the structural transformation effect, technological innovation effect, and investment attractiveness effect are three intermediate influence channels. Further research finds that the emissions reduction benefit increases as the spatial and temporal intensities of HSR openings ascend the ladder, and HSR services have a spillover effect within a 300-kilometer radius. Moreover, the carbon benefit of China’s HSR far surpasses its carbon footprint, indicating that China’s HSR is green after accounting for economic emissions reductions that were often neglected in prior research. Based on these findings, we recommend that China accelerate HSR expansion in order to reduce carbon emissions in a scientific and responsible manner.     

Market Structure and the Environmental Implications of Trade Liberalization: Russia's Accession to the World Trade Organization

We investigate the environmental impacts of Russia's World Trade Organization (WTO) accession with a computable general equilibrium model incorporating imperfectly competitive firms, foreign direct investment and endogenous productivity. WTO accession increases CO₂ emissions through technique (?), composition (+) and scale (+) effects. We consider three complementary policies to limit CO₂ emissions: cap and trade, emission intensity standards and energy efficiency standards. With imperfectly competitive firms, gains from WTO accession result with any of these policies. If we assume perfectly competitive market structures, the negative environmental impacts of WTO accession are smaller and no net gains arise when environmental regulation involves energy intensity or efficiency standards.     

The Stochastic Convergence of CO<Subscript>2</Subscript> Emissions: A Long Memory Approach

In response to equity concerns surrounding the spatial distribution of CO₂ emissions and assumptions of CO₂ convergence within some climate models, this paper examines the convergence of CO₂ emissions within the OECD over the period 1870–2004. More specifically, using the Local Whittle estimator and its variants we examine whether relative per capita CO₂ emissions are fractionally integrated, that is they are long memory processes which, although highly persistant, may revert to the mean/trend in the long run. Our results suggest that CO₂ emissions within 13 out of 18 OECD countries are indeed fractionally integrated implying that they converge over time, albeit slowly. Interestingly though, the countries whose emissions are not found to be fractionally integrated are some of the highest polluters within the OECD, at least in per capita terms. Our results have implications both for future studies of CO₂ convergence and for climate policy.     

Using real-time electricity data to estimate response to time-of-use and flat rates: an application to emissions

Using a generalized McFadden specification, we estimate the determinants of hourly response for the years 2006 through 2010 for all 16 standard retail customers who were on an optional real-time electricity rate offered by Duke Energy as of 2010, and provide a method to estimate how these customers would respond to time-of-use (TOU) and flat rates. We generalize the model to allow for inter-day response, as well as threshold prices, above which individual customer response may increase or decrease. With these inclusions, we find hourly elasticity for the group of customers to be as large as ?0.7, larger than previous studies. We apply the method to examine a recent finding that time-differentiated rates could increase electric utility emissions. However, that result did not differentiate between real-time and TOU rates, and furthermore held energy use constant in comparing flat rates and time-differentiated rates. We perform a case study to examine emissions of SO₂, NOx, Hg, and CO₂ based on predicted energy use changes as well as for an energy-neutral case for real-time, TOU and flat rates. Employing energy use predictions from the model, increased energy use results in increased emissions in almost all cases. For the energy-neutral case, time-differentiated rates increase CO₂ as compared to flat rates, and the TOU rate causes a larger increase than does real-time pricing. But both rates decrease other emissions in the majority of years, particularly SO₂ In addition, time-differentiated rates reduce NOx potency by shifting it to non-daylight hours when conditions for the formation of smog are less favorable. Our application leads to the conclusion that the effect of the rates on emissions must consider total energy use as well as the shift from peak to off-peak. Furthermore, the predictions require consideration of the generating mix at a more detailed level than was contained in previous studies.     

CO2 emissions, research and technology transfer in China

Although the economy of China has grown very strongly over the last few decades, this spectacular performance has come at the expense of rapid environmental deterioration. Amidst animated debate on the issue of global warming, this study attempts to explore the determinants of CO₂ emissions in China using aggregate data for more than half a century. Adopting an analytical framework that combines the environmental literature with modern endogenous growth theories, the results indicate that CO₂ emissions in China are negatively related to research intensity, technology transfer and the absorptive capacity of the economy to assimilate foreign technology. Our findings also indicate that more energy use, higher income and greater trade openness tend to cause more CO₂ emissions.     

Impacts of an EC carbon/energy tax and deregulating thermal power supply on CO2, SO2 and NOx emissions

Emission of CO₂, SO₂ and NO_x are all closely linked to the burning of fossil fuels. Here we report on simulations done by linking a Sectoral European Energy Model (SEEM), covering energy demand in nine Western European countries, with the emission-transport-deposition model RAINS developed by IIASA. The study analyses emissions of CO₂, SO₂ and NO_x, deposition of sulphur and nitrogen and the extent of areas where the critical load for sulphur is exceeded in year 2000 under four different energy scenarios. Two different sets of future behavioural patterns for the thermal electric power production sector are considered. In one regime, called the plan-efficient regime, the sector is assumed to follow official plans with regard to investment in new capacity. In the other regime, called the cost-efficient regime, the thermal power sector is assumed to behave in a cost minimizing manner. The effects of the proposed EC carbon/energy tax are studied under both regimes, giving rise to altogether four scenarios.In both regimes the effect of the EC tax is to reduce emissions by between 6 and 10 per cent in year 2000 relative to the scenarios without the tax. A change of regime, from the regulated, plan-efficient regime to the market-based, cost-efficient regime, will, by itself, reduce emissions of CO₂ and NO_x by approximately 3 per cent, while SO₂ emissions are reduced by 13 per cent. The EC tax will reduce sulphur deposition by more than 5 per cent in the nine model countries under the plan-efficient regime. A change of regime further reduces the total deposition by 9 per cent. The area where depositions exceed the critical load is reduced by approximately 6 per cent in year 2000 by the tax in both regimes. Changing from the plan-efficient to the cost-efficient regime has a similar impact.Although the emission reductions due to the EC tax may seem modest, they are shown to have a sizeable effect on the technological abatement costs of reaching targets like those prescribed in the Sofia protocol on the stabilisation of NO_x emissions, and the Helsinki protocol on SO₂ emission reductions. This is part of what can be considered to be secondary benefits of the EC carbon/energy tax.     

Is nuclear energy clean? Revisit of Environmental Kuznets Curve hypothesis in OECD countries

A transition towards the adoption of clean energy sources in electricity generation is essential to reduce the emission of greenhouse gases. The present study aims to examine the EKC hypothesis by taking into account nuclear energy in 18 OECD countries for the period 1995–2015. This study employs panel dynamic Generalised Method of Moments (GMM) and panel Fully Modified Ordinary Least Squares (FMOLS) to investigate the effects of electricity production from nuclear source, electricity production from non-renewables and trade openness on CO₂ emissions. The empirical findings suggest that EKC hypothesis is valid in OECD countries where nuclear energy plays a pivotal role in protecting the environment. On the contrary, non-renewable energy sources tend to increase CO₂ emissions. Our results support the notion that electricity generated by nuclear source leads to lower CO₂ emissions without retarding the long run growth in OECD countries. The findings also provide important policy insights and recommendations not only for OECD countries, but also for developing countries in designing appropriate energy and economic policies.     

Decomposing the decoupling of CO2 emissions and economic growth in Brazil

This paper examines the occurrence of a decoupling between the growth rates in economic activity and CO₂ emissions from energy consumption in Brazil from 2004 to 2009. This decoupling was highlighted when economic activity and CO₂ emissions moved in opposite directions in 2009. More generally, we observe several periods of relative decoupling in Brazil, but not to the extent witnessed in 2009. To identify the determinants of emissions change, we develop a decomposition model based on a log-mean Divisia index (LMDI) framework. The results indicate that the carbon intensity and energy mix are the main determinant of emissions reduction in Brazil between 2004 and 2009. Modifications in the economy structure are also associated to emission mitigation in the period. Such evidence demonstrates similarities with events of decoupling registered for the interval 1980-1994 in Brazil. Finds from Brazil differ from observations in other countries in which improvement in energy intensity has been the most common determinant of emissions reduction.     

Transition of the Chinese Economy in the Face of Deep Greenhouse Gas Emissions Cuts in the Future

China joined the Paris Agreement, and the global 2°C and 1.5°C warming targets will be supported by China. In order to achieve these targets, China's CO₂ emissions need to be cut deeply by 2050. The present paper presents studies from the integrated policy assessment model for China (IPAC) team about the impact on China's economic development of deep cuts in greenhouse gas (GHG) emissions, in order to realize the Paris climate change targets. With the requirement of deep cuts in GHG emissions in China, China's economic development will also be impacted in moving toward a low‐carbon or zero‐carbon emission‐based economy by 2050. This means the Chinese economy needs a strong transition over the next three decades, a relatively short time. All sectors in the economy need to seek ways to reduce GHG emissions, and this could change activities, industry processes and technologies in order to make the deep cuts in GHG emissions happen. This is the meaning of the economic transition toward to a low‐carbon economy. The findings of the present paper include: a significant transition in the energy supply sector; a high rate of electrification in all end‐use sectors; and a technology transition in the transport sector. Transitions will also occur in the traditional industrial sectors, including steel making, cement manufacture, and the chemical sector. The availability of low‐cost renewable energy could change the allocation of industries, which could potentially have a strong impact on regional economic development. Deep cuts in CO₂ emissions in China need not be a burden for economic development, as the IPAC results show there will be a more than 1.5% increase of gross domestic product by 2050 in the deep cut scenario compared with the baseline scenario.