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An environmental CGE model of China’s economy: Modeling choices and application

Show Author's Information Yu Liu1,2( ),  Nenggao Zhu3,4,  Meifang Zhou5,  Xin Wen6,  Lingyu Yang3,4,  Xinbei Li3,4,  Jinzhu Zhang1
College of Urban and Environmental Sciences, Peking University, Beijing 100871, China
Institute of Carbon Neutrality, Peking University, Beijing 100871, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China
Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
School of Economics, Beijing Technology and Business University, Beijing 100048, China
School of Economics and Management, Beihang University, Beijing 100191, China
Keywords:
Computable general equilibrium model, economic closure, investment mechanism, back-of-the-envelope
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Liu Y, Zhu N, Zhou M, et al. An environmental CGE model of China’s economy: Modeling choices and application. Energy and Climate Management, 2024, https://doi.org/10.26599/ECM.2024.9400002
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Abstract Full text About this article

This article discusses the expansion and application of computable general equilibrium (CGE) models as significant policy guidance tools for pollution reduction and emission control objectives. Based on the theoretical framework of the Australian school of CGE modeling, we have developed an integrated model that encompasses energy, environment, and economy. This model incorporates energy, environmental, and emission introduction processes, closure mechanisms, and dynamic adjustments. Before simulations, we typically conduct Back-of-the-envelope (BOTE) analyses and validate the accuracy of economic theory judgments and model simulation results through comparative analysis. The article also summarizes our research based on the CGE model, including investigations into differences under various carbon tax revenue policies, comparisons between single-region and multi-region carbon market mechanisms, rebound effects from energy efficiency improvements, impacts of different environmental tax strategies, and the cost-neutral setting of carbon neutrality goals. These findings demonstrate the widespread application and significance of CGE models in theoretical research and policy formulation.


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About this article

An environmental CGE model of China’s economy: Modeling choices and application

Show Author's information Yu Liu1,2( ), Nenggao Zhu3,4, Meifang Zhou5, Xin Wen6, Lingyu Yang3,4, Xinbei Li3,4, Jinzhu Zhang1
College of Urban and Environmental Sciences, Peking University, Beijing 100871, China
Institute of Carbon Neutrality, Peking University, Beijing 100871, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China
Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
School of Economics, Beijing Technology and Business University, Beijing 100048, China
School of Economics and Management, Beihang University, Beijing 100191, China

Abstract

This article discusses the expansion and application of computable general equilibrium (CGE) models as significant policy guidance tools for pollution reduction and emission control objectives. Based on the theoretical framework of the Australian school of CGE modeling, we have developed an integrated model that encompasses energy, environment, and economy. This model incorporates energy, environmental, and emission introduction processes, closure mechanisms, and dynamic adjustments. Before simulations, we typically conduct Back-of-the-envelope (BOTE) analyses and validate the accuracy of economic theory judgments and model simulation results through comparative analysis. The article also summarizes our research based on the CGE model, including investigations into differences under various carbon tax revenue policies, comparisons between single-region and multi-region carbon market mechanisms, rebound effects from energy efficiency improvements, impacts of different environmental tax strategies, and the cost-neutral setting of carbon neutrality goals. These findings demonstrate the widespread application and significance of CGE models in theoretical research and policy formulation.

Keywords: Computable general equilibrium model, economic closure, investment mechanism, back-of-the-envelope

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Publication history

Received: 30 December 2023
Revised: 24 January 2024
Accepted: 07 March 2024
Published: 08 May 2024

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© The author(s) 2024.

Acknowledgements

The paper is supported by National Natural Science Foundation of China (72125010, 72243011, 71974186, 72104014) and The Fundamental Research Funds for the Central Universities in Peking University.

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This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

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