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, 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.
Jing Cao, Mun Sing 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, 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.
2019 Jun 01

CCICED Annual Meeting

Sat Jun 1 (All day) to Wed Jun 5 (All day)


Hangzhou International Expo Center, Zhejiang Province, China

China Project faculty chair, Michael McElroy, who has been appointed to the China Council for International Cooperation on Environment and Development (CCICED) for a 5-year term, and Executive Director, Chris Nielsen, will be participating in the ...

Read more about CCICED Annual Meeting
2019 Mar 07

China and Asia in a Changing Climate: Natural Science for the Non-Scientist

12:15pm to 1:45pm


CGIS South S020, Belfer Case Study Room, 1730 Cambridge St., Cambridge, MA


  • Professor John Holdren, Teresa and John Heinz Professor of Environmental Policy, Harvard Kennedy School (HKS) and Department of Earth and Planetary Sciences, Harvard University; Co-Director of Science, Technology, and Public Policy Program, HKS; former Science Advisor to President Barack Obama and former Director of the White House Office of Science and Technology Policy
  • Professor Peter Huybers, Department of Earth and Planetary Sciences, Harvard University, and Harvard John A. Paulson School of Engineering and Applied Sciences
  • Professor Elsie SunderlandGordon McKay Professor of Environmental Chemistry, Harvard John A. Paulson School of Engineering and Applied Sciences and Harvard T.H. Chan School of Public Health
  • Professor Steve Wofsy, Abbott Lawrence Rotch Professor of Atmospheric and Environmental Science, Department of Earth and Planetary Sciences, Harvard University, and Harvard John A. Paulson School of Engineering and Applied Sciences

Chair: Professor Mike McElroy, Gilbert Butler Professor of Environmental Studies, Department of Earth and Planetary Sciences, Harvard University, and Harvard John A. Paulson School of Engineering and Applied Sciences; Chair, Harvard-China Project on Energy, Economy and Environment... Read more about China and Asia in a Changing Climate: Natural Science for the Non-Scientist

Lin Zhou, Jianglong Li, Yangqing Dan, Chunping Xie, Houyin Long, and Hongxun Liu. 2019. “Entering and exiting: Productivity evolution of energy supply in China.” Sustainability, 11, 983. Publisher's VersionAbstract
The continuous entry of new firms and exit of old ones might have substantial effects on productivity of energy supply. Since China is the world’s largest energy producer, productivity of energy supply in China is a significant issue, which affects sustainability. As a technical application, this paper investigates the productivity and dynamic changes of Chinese coal mining firms. We find that the total factor productivity (TFP) growth of coal supply in China is largely lagging behind the growth rate of coal production. The entry and exit of non-state-owned enterprise (non-SOE) partially provide explanation for the dynamic change of aggregate TFP. Specifically, non-state owned entrants induced by the coal price boom after 2003, which had negative effects on TFP of energy supply, while the exit of non-SOEs had positive effects. Furthermore, there is regional heterogeneity concerning the effects of entry and exit on energy supply productivity. More entrants induced by coal price boom are concentrated in non-main production region (non-MPR), while more exits are located in MPR due to the government’s enforcement. This provides explanation for the phenomena that productivity of energy supply in MPR gradually surpasses that in non-MPR. We also anticipate our paper to enhance understanding on the energy supply-side, which might further help us make informed decisions on energy planning and environmental policies.
James K. Hammitt, Fangli Geng, Xiaoqi Guo, and Chris P. Nielsen. In Press. “Valuing Mortality Risk in China: Comparing Stated-Preference Estimates from 2005 and 2016.” Journal of Risk & Uncertainty. Publisher's VersionAbstract
We estimate the marginal rate of substitution of income for reduction in current annual mortality risk (the “value per statistical life” or VSL) using stated-preference surveys administered to independent samples of the general population of Chengdu, China in 2005 and 2016. We evaluate the quality of estimates by the theoretical criteria that willingness to pay (WTP) for risk reduction should be strictly positive and nearly proportional to the magnitude of the risk reduction (evaluated by comparing answers between respondents) and test the effect of excluding respondents whose answers violate these criteria. For subsamples of respondents that satisfy the criteria, point estimates of the sensitivity of WTP to risk reduction are consistent with theory and yield estimates of VSL that are two to three times larger than estimated using the full samples. Between 2005 and 2016, estimated VSL increased sharply, from about 22,000 USD in 2005 to 550,000 USD in 2016. Income also increased substantially over this period. Attributing the change in VSL solely to the change in real income implies an income elasticity of about 3.0. Our results suggest that estimates of VSL from stated-preference studies in which WTP is not close to proportionate to the stated risk reduction may be biased downward by a factor of two or more, and that VSL is likely to grow rapidly in a population with strong economic growth, which implies that environmental-health, safety, and other policies should become increasingly protective.
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.

Hang Yu

Fellow, Harvard-China Project
Ph.D. Student, School of Economics, Peking University
Pierce Hall G2B, 29 Oxford St., Cambridge, MA