Economy and Policy

 

 

Qiang Liu

Qiang Liu

Ph.D Candidate, Institute of Energy, Environment and Economy, Tsinghua University
Visiting Fellow, Harvard-China Project
Qiang Liu is a Ph.D candidate from the Institute of Energy, Environment and Economy, Tsinghua University. His research interests are energy and climate... Read more about Qiang Liu
Jianglong Li, Jinfeng Gao, and Mun Sing Ho. 2024. “Causal effect of aviation on air pollution: An instrumental variable from faraway COVID-19 restrictions in China.” China Economic Review, 84, April 2024, Pp. 102140. Publisher's VersionAbstract
The causal impacts of aviation on local air pollution are poorly understood. Leveraging variation in aviation frequency caused by COVID-19 travel restrictions that occurred hundreds of miles away between 2020 and 2022, this study identifies the short-run effect of aviation on air pollution in Hangzhou, a Chinese megacity. The results demonstrate that a one standard deviation change in aviation is associated with 12% to 21.82% changes in ambient pollution concentrations, with even more substantial pollution effects on downwind days and flights departing from Hangzhou, respectively. These estimates also remain robust to alternative specifications, satisfy external validity beyond Hangzhou and the epidemic period, and exclude pollution spillover effects. We further quantify the welfare losses from aviation pollution and find that people are willing to pay 1.76 US dollars a day in per capita household income for reducing pollution caused by each standard deviation increase in flights (i.e., 134 flights). Further analysis reveals higher economic losses resulting from pollutants at international airports. Our results underscore the need to regulate airborne contaminants from aviation in China urgently.
Jing Cao, Mun S Ho, Rong Ma, and Yu Zhang. In Press. “Transition from plan to market: Imperfect regulations in the electricity sector of China.” Journal of Comparative Economics. Publisher's VersionAbstract
We present evidence on the distortions that arise from imperfect regulations compared with market allocation mechanisms. Using a triple difference strategy, we evaluate the effectiveness of the Energy-Saving Generation Dispatch reform in China, which aims to allocate more generating hours to power plants with higher energy efficiency. We find that the new dispatch rule improved resource allocation within provinces compared with the previous equal-share dispatch rule. However, despite these improvements, the reform fell short of its intended goals because of the failure to strictly implement the merit order based on real-time coal consumption rates. We demonstrate how the lack of compensation for losers, technical requirements for grid stability, the existence of multiple goals, and information costs contribute to imperfect regulation.
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.
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.
2024 Feb 01

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