Book 2: Clearer Skies Over China

This multi-component research initiative is led by China Project researchers at Harvard, Tsinghua University, and Nanjing University. The program evaluates the economic and environmental costs and benefits of national policies to control air pollution and CO2 emissions in China, using a comprehensive framework.

The results and policy conclusions of the assessment are presented in Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals (Nielsen and Ho 2013, MIT Press).

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The Framework

In Clearer Skies Over China, China Project economists, engineers, atmospheric scientists, and health scientists have integrated the economics-engineering-health framework developed in a prior book by the Project, Clearing the Air, with its separately developed GEOS-Chem atmospheric model of China. This long-intended Project integration is possible due to advances in the resolution of national emission inventories by researchers originally from Tsinghua U., who improved inventories and linked them together as Harvard post-docs and now participate in the China Project from home institutions in China. The improved spatial and sector resolution of emission inventories makes the linking of a sector-based economic model and a spatially-resolved atmospheric model feasible. The emission inventory research is described here.

The result is an advance in understanding the full atmospheric and related effects of emission control and energy policies shaping the Chinese economy. This model integration allows the team to better quantify the effects of complex secondary pollutants like ozone and sulfates on public health, agricultural productivity, and the economy, and potentially of black carbon and sulfates on radiative forcing. The multi-disciplinary team first completed assessment of two policies using the newly comprehensive framework, looking backwards to the years 2006-2010 to take advantage of more complete datasets:

  • A carbon tax of 100 yuan/ton of carbon (roughly US$4/ton CO2), in which avoided local pollution and health damages are a co-benefit of GHG control; and
  • The ambitious sulfur control measures of the 11th Five Year Plan (2006-2010), in which effects on carbon emissions are a co-benefit of local pollution control.

This comprehensive framework was then used to evaluate a variety of carbon tax structures in China looking forward to 2013-2020, including:

  • different tax levels;
  • different assumptions about carbon prices in the rest of the world.
  • different revenue uses, including lump-sum rebates to consumers, revenue-neutral reductions of distortionary existing taxes, and support for emission-intensive, trade-exposed industries; and
  • different time-paths of tax implementation;

The new book, Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, reports results of the scenarios for both 2006-2010 and 2013-2020. The results were also the subject of an op-ed in the Sunday Review of the New York Times by Chris NIELSEN and Mun HO of the China Project. 

Lead Policy Conclusions

See Factsheet below.

Support

This complex collaboration was seed-funded by the Harvard China Fund, and has been generously supported by grants from the Energy Foundation China, a Harvard fund for student and post-doctoral fellowships, the National Science Foundation (ATM-063558 and ATM-1019134) and the Harvard Weatherhead Center for International Affairs. The economics component is now separately supported by an award from the Cheung Yan Fund of the Harvard Department of Economics.

Continuing Work

Following the completion of Clearer Skies Over China, the team has been using the framework to assess the costs and benefits of other approaches China is implementing, or considering, to limit its atmospheric emissions. These analyses (funded by new awards from the Energy Foundation China) consider policy strategies to reduce local and regional air pollution, specifically:

  • the NOX controls in the 12th Five Year Plan (2011-2015);
  • prospective control of other environmentally potent species, notably ammonia.

The research team has now returned to assessment of tax-based emission control options, based on ongoing consultations with the Research Institute for Fiscal Science of the Chinese Ministry of Finance. These include:

  • new resource taxes enacted in China, notably on coal;
  • prospective carbon taxes aligned to achieve China's targets under recent U.S.-China joint announcements and its INDC pledges at the COP-21 UN climate negotiations in Paris.

New extensions of the framework include stronger consideration of the fiscal effects of tax-based emission controls, and their role in overall tax reform anticipated in China through 2020. The team is also incorporating a household demand model to allow assessment of the incidence of different tax policies, for instance across different Chinese income classes or across the rural-urban divide.

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Op-Ed in Fortune by Ho and Nielsen on China's Red Alert Pollution Struggles

January 10, 2017

Project Economist Mun HO and Executive Director Chris NIELSEN have an op-ed in Fortune (and in Chinese at Fortune China)on the underappreciated reasons China's red alert air pollution episodes are proving so difficult to control. Factors range from atmospheric chemistry and meteorology to economics and politics.

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