Ho, Mun S.

2019
Jing Cao, Mun S. Ho, Dale W. Jorgenson, and Chris P. Nielsen. 2019. “China’s emissions trading system and an ETS-carbon tax hybrid.” Energy Economics, 81, June, Pp. 741-753. Publisher's VersionAbstract
China is introducing a national carbon emission trading system (ETS), with details yet to be finalized. The ETS is expected to cover only the major emitters but it is often argued that a more comprehensive system will achieve the emission goals at lower cost. We first examine an ETS that covers both electricity and cement sectors and consider an ambitious cap starting in 2017 that will meet the official objective to reduce the carbon-GDP intensity by 60-65% by 2030 compared to 2005 levels. The two ETS-covered industries are compensated with an output-based subsidy to represent the intention to give free permits to the covered enterprises. We then consider a hybrid system where the non-ETS sectors pay a carbon tax and share in the CO2 reduction burden. Our simulations indicate that hybrid systems will achieve the same CO2 goals with lower permit prices and GDP losses. We also show how auctioning of the permits improves the efficiency of the ETS and the hybrid systems. Finally, we find that these CO2 control policies are progressive in that higher incomes households bear a bigger burden.
Appendix
Jing Cao, Mun S. Ho, Yating Li, Richard G. Newell, and William A. Pizer. 2019. “Chinese residential electricity consumption estimation and forecast using micro-data.” Resource and Energy Economics, 56, May, Pp. 6-27. Publisher's VersionAbstract
Based on econometric estimation using data from the Chinese Urban Household Survey, we develop a preferred forecast range of 85–143 percent growth in residential per capita electricity demand over 2009–2025. Our analysis suggests that per capita income growth drives a 43% increase, with the remainder due to an unexplained time trend. Roughly one-third of the income-driven demand comes from increases in the stock of specific major appliances, particularly AC units. The other two-thirds comes from non-specific sources of income-driven growth and is based on an estimated income elasticity that falls from 0.28 to 0.11 as income rises. While the stock of refrigerators is not projected to increase, we find that they contribute nearly 20 percent of household electricity demand. Alternative plausible time trend assumptions are responsible for the wide range of 85–143 percent. Meanwhile we estimate a price elasticity of demand of −0.7. These estimates point to carbon pricing and appliance efficiency policies that could substantially reduce demand.
Jing Cao, Mun S Ho, and Wenhao Hu. 2019. “Energy consumption of urban households in China.” China Economic Review, 58, 101343. Publisher's VersionAbstract
We estimate China urban household energy demand as part of a complete system of consumption demand so that it can be used in economy-wide models. This allows us to derive cross-price elasticities unlike studies which focus on one type of energy. We implement a two-stage approach and explicitly account for electricity, domestic fuels and transportation demand in the first stage and gasoline, coal, LPG and gas demand in the second stage. We find income inelastic demand for electricity and home energy, but the elasticity is higher than estimates in the rich countries. Demand for total transportation is income elastic. The price elasticity for electricity is estimated to be −0.5 and in the range of other estimates for China, and similar to long-run elasticities estimated for the U.S.
2018
Govinda R. Timilsina, Jing Cao, and Mun S. Ho. 2018. “Carbon tax for achieving China's NDC: Simulations of some design features using a CGE model.” Climate Change Economics, 9, 3. Publisher's VersionAbstract
China has set a goal of reducing its CO2 intensity of GDP by 60–65% from the 2005 level in 2030 as its nationally determined contribution (NDC) under the Paris Climate Change Agreement. While the government is considering series of market and nonmarket measures to achieve its target, this study assesses the economic consequences if the target were to meet through a market mechanism, carbon tax. We used a dynamic computable general equilibrium model of China for the analysis. The study shows that the level of carbon tax to achieve the NDC target would be different depending on its design features. An increasing carbon tax that starts at a small rate in 2015 and rises to a level to meet the NDC target in 2030 would cause smaller GDP loss than the carbon tax with a constant rate would do. The GDP loss due to the carbon tax would be smaller when the tax revenue is utilized to cut existing distortionary taxes than when it is transferred to households as a lump-sum rebate.
Jaume Freire-González and Mun S. Ho. 2018. “Environmental fiscal reform and the double dividend: evidence from a dynamic general equilibrium model.” Sustainability, 10, 2. Publisher's VersionAbstract
An environmental fiscal reform (EFR) represents a transition of a taxation system toward one based in environmental taxation, rather than on taxation of capital, labor, or consumption. It differs from an environmental tax reform (ETR) in that an EFR also includes a reform of subsidies which counteract environmental policy. This research details different ways in which an EFR is not only possible but also a good option that provides economic and environmental benefits. We have developed a detailed dynamic CGE model examining 101 industries and commodities in Spain, with an energy and an environmental extension comprising 31 pollutant emissions, in order to simulate the economic and environmental effects of an EFR. The reform focuses on 39 industries related to the energy, water, transport and waste sectors. We simulate an increase in taxes and a reduction on subsidies for these industries and at the same time we use new revenues to reduce labor, capital and consumption taxes. All revenue recycling options provide both economic and environmental benefits, suggesting that the “double dividend” hypothesis can be achieved. After three to four years after implementing an EFR, GDP is higher than the base case, hydrocarbons consumption declines and all analyzed pollutants show a reduction.
Xiaolin Guo, Mun Sing Ho, Liangzhi You, Jing Cao, Yu Fang, Taotao Tu, and Yang Hong. 2018. “Industrial water pollution discharge taxes in China: A multi-sector dynamic analysis.” Water, 10, 12, Pp. 1742. Publisher's VersionAbstract
We explore how water pollution policy reforms in China could reduce industrial wastewater pollution with minimum adverse impact on GDP growth. We use a multi-sector dynamic Computable General Equilibrium (CGE) model, jointly developed by Harvard University and Tsinghua University, to examine the long-term impact of pollution taxes. A firm-level dataset of wastewater and COD discharge is compiled and aggregated to provide COD-intensities for 22 industrial sectors. We simulated the impact of 4 different sets of Pigovian taxes on the output of these industrial sectors, where the tax rate depends on the COD-output intensity. In the baseline low rate of COD tax, COD discharge is projected to rise from 36 million tons in 2018 to 48 million in 2030, while GDP grows at 6.9% per year. We find that raising the COD tax by 8 times will lower COD discharge by 1.6% by 2030, while a high 20-times tax will cut it by 4.0%. The most COD-intensive sectors—textile goods, apparel, and food products—have the biggest reduction in output and emissions. The additional tax revenue is recycled by cutting existing taxes, including taxes on profits, leading to higher investment. This shift from consumption to investment leads to a slightly higher GDP over time.
2016
Jing Cao, Mun S. Ho, and Huifang Liang. 2016. “Household energy demand in urban China: Accounting for regional prices and rapid economic change.” The Energy Journal, 37. Publisher's VersionAbstract

Understanding the rapidly rising demand for energy in China is essential to efforts to reduce the country's energy use and environmental damage. In response to rising incomes and changing prices and demographics, household use of various fuels, electricity and gasoline has changed dramatically in China. In this paper, we estimate both income and price elasticities for various energy types using Chinese urban household micro-data collected by National bureau of Statistics, by applying a two-stage budgeting AIDS model. We find that total energy is price and income inelastic for all income groups after accounting for demographic and regional effects. Our estimated electricity price elasticity ranges from - 0.49 to -0.57, gas price elasticity ranges from -0.46 to -0.94, and gasoline price elasticity ranges from -0.85 to -0.94. Income elasticity for various energy types range from 0.57 to 0.94. Demand for coal is most price and income elastic among the poor, whereas gasoline demand is elastic for the rich.

2013
Chris P Nielsen and Mun S Ho. 2013. “Atmospheric Environment in China: Introduction and Research Review.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 3-58. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Clearer Skies Over China: Reconciling Air Pollution, Climate, and Economic Goals
2013. Clearer Skies Over China: Reconciling Air Pollution, Climate, and Economic Goals. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Jing Cao, Mun S Ho, and Dale W Jorgenson. 2013. “The Economics of Environmental Policies in China.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 329-372. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Chris P Nielsen and Mun S Ho. 2013. “Op-ed: Clearing the air in China.” New York Times (Sunday Review), October 27 , Pp. SR4. Publisher's Version
Chris P Nielsen, Mun S Ho, Jing Cao, Yu Lei, Yuxuan Wang, and Yu Zhao. 2013. “Summary: Carbon Taxes for 2013-2020.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 103-157. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

Chris P Nielsen, Mun S Ho, Yu Zhao, Yuxuan Wang, Yu Lei, and Jing Cao. 2013. “Summary: Sulfur Mandates and Carbon Taxes for 2006-2010.” In Clearer Skies Over China: Reconciling Air Quality, Climate, and Economic Goals, Pp. 59-102. Cambridge, MA: MIT Press. Publisher's VersionAbstract

A groundbreaking U.S.–Chinese inquiry into the effects of recent air pollution controls and prospective carbon taxes on China's economy and environment.

China's carbon dioxide emissions now outstrip those of other countries and its domestic air quality is severely degraded, especially in urban areas. Its sheer size and its growing, fossil-fuel-powered economy mean that China's economic and environmental policy choices will have an outsized effect on the global environmental future. Over the last decade, China has pursued policies that target both fossil fuel use and atmospheric emissions, but these efforts have been substantially overwhelmed by the country's increasing energy demands. With a billion citizens still living on less than $4,000 per year, China's energy and environmental policies must be reconciled with the goals of maintaining economic growth and raising living standards.

This book, a U.S.–Chinese collaboration of experts from Harvard and Tsinghua University, offers a groundbreaking integrated analysis of China's economy, emissions, air quality, public health, and agriculture. It first offers essential scientific context and accessible summaries of the book's policy findings; it then provides the underlying scientific and economic research. These studies suggest that China's recent sulfur controls achieved enormous environmental health benefits at unexpectedly low costs. They also indicate that judicious implementation of carbon taxes could reduce not only China's carbon emissions but also its air pollution more comprehensively than current single-pollutant policies, all at little cost to economic growth.

2012
Jing Cao, Mun S Ho, and Dale W Jorgenson. 2012. “An integrated assessment of the economic costs and environmental benefits of pollution and climate control.” In The Chinese Economy: A New Transition, edited by Masahiko Aoki. London: Palgrave Macmillan. Publisher's Version
2010
Karen Fisher-Vanden and Mun S Ho. 2010. “Technology, development, and the environment.” Journal of Environmental Economics and Management, 59, 1, Pp. 94-108. Publisher's VersionAbstract
In an attempt to achieve the positive externalities from a more knowledge-intensive economy, many developing countries have emphasized improvements in their science and technology (S&T) capabilities. China, in particular, has been experiencing an acceleration in its R&D intensity, causing many to wonder whether China is undergoing an S&T takeoff. In this paper, we simulate the effects of an S&T takeoff using a model of China that incorporates econometric estimates from 1500 industrial enterprises in China. We find that an S&T takeoff will lead to lower goods prices overall, but a larger drop in energy prices due to the energy-saving bias of R&D. The outcome is higher capital investment and economic growth; a substitution of energy for other factors of production; and greater energy consumption by households. Our findings underscore the importance of considering the economy-wide implications of a technology policy, recognizing that better technology does not necessarily imply a cleaner environment.
2009
Jing Cao, Richard Garbaccio, and Mun S Ho. 2009. “China's 11th Five-Year Plan and the environment: Reducing SO2 emissions.” Review of Environmental Economics and Policy, 3, 2, Pp. 189-208. Publisher's VersionAbstract
China's rapid economic growth has been accompanied by a high level of environmental degradation. One of the major sources of health and ecosystem damages is sulfur dioxide (SO2). Reducing SO2 emissions is a priority of China's environmental authorities, and the 11th Five-Year Plan (2006–2010) includes the target of reducing total SO2 emissions by 10 percent from the 2005 level. Given the rapid increase in SO2 emissions that is expected to occur in absence of intervention, attaining this target will require a significant effort. This article examines the two major policy measures the government is taking to achieve the SO2 target: a shutdown of many small, inefficient power plants and the installation of desulfurization equipment on existing and new coal-fired plants. We present results from a joint U.S.–China study that we participated in, which estimated the costs and benefits of these policies. We then estimate the economy-wide impacts of the two policies using a multisector model of the Chinese economy. We find that in the aggregate, the economic benefits of the shutdown of the small power plants are large enough to offset the costs of the desulfurization equipment, even without considering the substantial environmental benefits from the reduction of emissions of SO2 and other pollutants.
Jing Cao, Mun S Ho, Dale W Jorgenson, Rouen Ren, Linlin Sun, and Ximing Yue. 2009. “Industrial and aggregate measures of productivity growth in China, 1982-2000.” Review of Income Wealth , 55, s1, Pp. 485-513. Publisher's VersionAbstract
We estimate productivity growth for 33 industries covering the entire Chinese economy using a time series of input–output tables covering 1982–2000. Capital input is measured using detailed investment data by asset and labor input uses demographic information from household surveys. We find a wide range of productivity performance at the industry level. We then show how these industry growth accounts may be consistently aggregated to deliver a decomposition of aggregate GDP growth. For the 1982–2000 period aggregate TFP growth was 2.5 percent per year; decelerating from a rapid rate in the early 1980s to negative growth during 1994–2000. The main source of growth during the 1982–2000 period was capital accumulation, with a small negative contribution from the reallocation of factors across industries.
Jing Cao, Mun S Ho, and Dale W Jorgenson. 2009. “The local and global benefits of green tax policies in China.” Review of Environmental Economics and Policy, 3, 2, Pp. 231-250. Publisher's VersionAbstract
This article describes a multidisciplinary study of market-based policies for controlling air pollution in China. While previous studies have examined the costs and benefits of pollution control separately, this approach determines them together using an economy–environment model for China. We employ air dispersion simulations and population maps to calculate health damages due to air pollution. This provides estimates of incremental damages for industry output and fuel use. Based on these marginal damages, we simulate the effect of “green taxes” on the economy and show that the environmental benefits exceed the aggregate costs, ignoring adjustment costs for individual sectors.
2007
Karen Fisher-Vanden and Mun S Ho. 2007. “How do market reforms affect China's responsiveness to environmental policy?” Journal of Development Economics, 82, 1, Pp. 200-233. Publisher's VersionAbstract
A large percentage of total investment in China is allocated by the central government at below-market interest rates in pursuit of non-economic objectives. This has resulted in low rates of return and a high number of non-performing loans, threatening the future health of the Chinese economy. As a result, reform of capital markets is a high priority of the Chinese government. At the same time, the country is implementing various environmental policies to deal with serious pollution issues. In this paper we ask how reforms of the capital market will affect the functioning of a carbon tax. This allows us to assess how China's willingness to join global efforts to reduce carbon emissions is influenced by China's current efforts to reduce investment subsidies. We compare the costs of a carbon tax in a reformed economy with the costs of a carbon tax in the current subsidized economy. We find that in the subsidized economy the tax-interaction effect dampens the effect of a carbon tax resulting in smaller reductions in emissions than what would result in a reformed economy. Importantly, we also find that the effect on economic welfare from a carbon tax is lower in the subsidized economy; in fact, for lower levels of reductions, the carbon tax is actually welfare improving. These results have important implications for an economy undergoing economic transition. The carbon tax rate required to achieve a certain level of emission reductions will be higher in an economy with capital subsidies. However, the welfare implications of the tax indicate that the current system with capital subsidies is highly distorting implying that there is a high efficiency cost for the non-economic objectives the government is pursuing by maintaining this system of subsidies.
Chris P Nielsen and Mun S Ho. 2007. “Air pollution and health damages in China: An introduction and review.” In Clearing the air: The health and economic damages of air pollution in China, edited by Chris P Nielsen and Mun S Ho. Cambridge, MA: MIT Press. Publisher's VersionAbstract

An interdisciplinary, quantitative assessment of the health and economic costs of air pollution in China, and of market-based policies to build environmental protection into economic development.

China's historic economic expansion is driven by fossil fuels, which increase its emissions of both local air pollutants and greenhouse gases dramatically. Clearing the Air is an innovative, quantitative examination of the national damage caused by China's degraded air quality, conducted in a pathbreaking, interdisciplinary U.S.-China collaboration. Its damage estimates are allocated by sector, making it possible for the first time to judge whether, for instance, power generation, transportation, or an unexpected source such as cement production causes the greatest environmental harm. Such objective analyses can reset policy priorities.

Clearing the Air uses this information to show how appropriate "green" taxes might not only reduce emissions and health damages but even enhance China's economic growth. It also shows to what extent these same policies could limit greenhouse gases, suggesting that wealthier nations have a responsibility to help China build environmental protection into its growth.

Clearing the Air is written for diverse readers, providing a bridge from underlying research to policy implications, with easily accessible overviews of issues and summaries of the findings for nonspecialists and policymakers followed by more specialized, interlinked studies of primary interest to scholars. Taken together, these analyses offer a uniquely integrated assessment that supports the book's economic and policy recommendations.

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