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Review of Environmental Economics and Policy Advance Access originally published online on June 23, 2009
Review of Environmental Economics and Policy 2009 3(2):189-208; doi:10.1093/reep/rep005
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© The Author 2009. Published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

The Local and Global Benefits of Green Tax Policies in China

Jing Cao*, Mun S. Ho{dagger} and Dale W. Jorgenson{ddagger}

* Cao is Assistant Professor at the School of Economics and Management, Tsinghua University
{dagger} Ho is a Visiting Scholar at the Institute of Quantitative Social Science, Harvard University
{ddagger} Jorgenson is Professor in the Department of Economics, Harvard University; e-mail: djorgenson{at}harvard.edu

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.

JEL Classification: Q56, Q58

We are grateful to the editor and an anonymous referee for helpful comments.


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