برآورد هزینه های اقتصادی از سیاست دسولفور جدید چین در الحاق تدریجی او به WTO: مورد انتشار SO2 صنعتی

To understand the potential impacts of China's accession to WTO on her new desulphur policy (gradual reduction of 10% of annual SO2 emission by 2005 with respect to that of 2000), we construct a CGE model in which SO2 emission is directly linked to energy input consumption in production. The model equally considers the substitution possibility between energies of different SO2 effluent ratios by including energy as labor and capital in the constant elasticity of transformation production function. The positive externality of trade in China's economy is also included. This model is then calibrated into a 55-sector Chinese SAM for the year 1997. Four policy simulations (Business as Usual, Openness policy only, desulfur policy only, and the combination of openness and desulfur policy) are made for the period from 1997 to 2005. The results show that the environmental impact of trade, though proven to be “negative”, stays rather modest. This is owing to the industrial composition transformation that deviates the specialization of the Chinese economy towards labor-intensive sectors under the new trade liberalization process. We do not find evidence for the “pollution haven” hypothesis. Seemingly ambitious, the new desulphur policy will only bring small economic growth loss. The pollution reduction objective will be realized mainly by substitution between polluting and less or non-polluting energies. The combination of trade liberalization and pollution control policy seems to give China more flexibility in adapting her economy to the new desulphur objective. Considering these different aspects together, the total economic loss due to the new desulphur policy will be limited to only − 0.26% under the presence of trade liberalization.

In the last 10 years the Chinese economy was characterized by high growth rates. According to official statistical data, the average growth rate of its real GDP stayed steadily over 8% during 1990–2000. Per capita GDP almost tripled, from 1634 Yuan in 1990 to 3843 Yuan in 2000. Like many other East Asian countries, China experienced remarkable expansion of its industrial sector (from 37% of total GDP in 1990 to 52% in 1999),1 and its economy is quickly integrating into the world economy. This is not only reflected in fast growth of her ratio of international trade to GDP, but also marked by the enormous inflow of foreign direct investments. However, China's economy and openness success were accompanied by obvious environmental deterioration. Due to concentration of industrial activities and high population density since the 1980s, SO2 pollution in urban regions has increased dramatically. Over one-third of Chinese big cities have SO2 concentration levels of at least double the standard of 60 μg/m3 fixed by the WHO (World Health Organization) for the developing countries.2 Some studies revealed negative impact of SO2 pollution on people's health in China, especially as a significant cause of respiratory diseases.3 Due to SO2 emission, the ever-expanding acid rain problem in both south and north China has resulted in rapid reduction in equipment and soil productivity.4 What are the impacts of SO2 pollution in China's economy growth and trade openness trajectory? In spite of the various theoretical assumptions, the trade–environment nexus still stays partially unrevealed. Grossman (1995) regarded pollution as a “joint-product” of production activities, which is determined by three economic characteristics: scale, composition and technical effect. Different hypotheses predict different influences of trade on the three effects. The trade–environment relationship can be explained first from the scale aspect. Regarding pollution as a “joint-product” of production, trade's role in economic expansion predicts a positive impact on pollution increases through the scale aspect. Concerning the aspect of industrial composition, the “pollution haven” hypothesis assumes China's relatively less strict environmental regulation compared to developed countries will turn China into an attractive migration destination for polluting industries. However, Copeland & Taylor, 1994 and Copeland & Taylor, 1997 indicated that besides comparative advantages coming from relative environmental regulation strictness, the traditional comparative advantages determined by natural resource endowment would also be a factor in explaining the international production division of polluting and less polluting industries. Since China's comparative advantages are in labor-intensive sectors, and we generally believe that labor-intensive industries are less polluting than capital-intensive ones, China's industrial composition transformation should depend on the weighing of these two comparative advantages which lead production specialization to go in opposite directions. The Porter hypothesis arises from the technical effect. It supposes that increased openness might in the long run reinforce production efficiency of China's domestic producer, both through direct import of foreign equipment embodied advanced technologies and through positive externality that intensifies competition and brings technology spillover. Since the environmental impacts of trade can be traced from all three aspects, without an appropriate analysis method which permits us to include each of them at the same time, the trade–environment nexus will certainly stay ambiguous from theoretical point of view. Parallel to the ambiguity in theoretical analyses, recent empirical studies on the trade–environment relationship did not achieve a coherent conclusion, either. Most of the empirical analyses did not find evidence to support the negative trade–environment relationship supposed by “pollution haven” hypothesis. In Agras and Chapman (1999), Antweiler, Copeland, and Taylor (2001), Grossman and Krueger (1991), and Tobey (1990), empirical results suggest that, whatever is its implication in pollution, “trade's impact—whether positive of negative—will be small”. The empirical studies supporting the “pollution haven” hypothesis are also quite limited in number. Some of them are based on industrial toxicity data (such as Hettige, Lucas, & Wheller, 1992 and Rock, 1996), a pollution indicator extrapolated from US manufacturing data. Some directly check the pollution impacts of import and export of certain polluting manufacture goods instead of a more general openness measurement (Suri & Chapman, 1998). Furthermore, since most empirical works are carried out by using cross-country data, the credibility to extrapolate the static snapshot of cross-country experience into a single country's trade–environment trajectory is also relatively limited. This is especially true for China, with its extremely rich endowment in coal—the principal source of its air pollution problem—which indicates the necessity to include this resource character in the study of its trade–environment nexus. Entering the new century, China's economy and environment face unprecedented challenges and opportunities. On one hand, according to the related articles in GATT (1994), from the beginning of 2002, China begins to gradually implement her commitments related to the WTO accession. Large reductions in tariffs, subvention and gradual phasing out of the NTBs are expected over the next 15 years, with the most important changes scheduled to happen during the first 10 years. This further deepening openness process will unavoidably affect China's economic growth, structure transformation and technological progress and equally her environmental situation. On the other hand, in June 2001, China's National Environment Protection Agency (NEPA) called for a further reduction of total annual SO2 emission by 10% nationwide and 20% in the two control zones (Acid-Rain Control Zone and SO2 Emission Control Zone) by the year 2005 based on the SO2 emission volume of the year 2000.5 Since the openness policy and the new desulfur policy were actually implemented during the same period (2001–2005), it undoubtedly offers us a perfect policy background to analyze the trade–environment nexus for China's case. Given the future SO2 emission ceiling fixed by the new desulfur policy is based on the emission level of year 2000, to attain the new desulfur policy's objective, China needs to reduce, on one hand, the original SO2 emission growth caused by the “Business as Usual” economy growth, and on the other hand, the further industrial SO2 emission variation caused by its accession to WTO. If China's SO2 emission will, as anticipated by the “pollution haven” hypothesis, increase with open process, the new desulfur objective will become more costly in future years. On the contrary, if the new desulfur policy seems less costly to economy growth under the on-coming openness process, we can conclude that trade in fact plays an environment-friendly role. To carry out such a country-specific trade–environment study for China requires us to take into account the complexity of Chinese economy as much as possible. During the last 8 years, a series of studies focusing on the trade–environment relationship for developing countries have emerged based on the 1996 pioneer prototype computable general equilibrium (CGE) trade–environment model developed by OECD Development Center—the Trade and Environment Equilibrium Analysis model (TEQUILA, Beghin et al., 1996). Examples include Beghin, Bowland, Dessus, and Roland-Holst (1999), Beghin, Dessus, Roland-Holst, and Van der Mensbrugghe (1997) on Mexico, Beghin, Dessus, Roland-Holst, and Van der Mensbrugghe (2002), Mensbrugghe, Roland-Holst, Dessus, and Beghin (1998) on Chile, etc. These studies, though similar in their modeling method managing to capture the trade–environment nexus through both scale and composition aspects, project quite different trajectory of the trade–environment nexus for countries. This actually reveals the importance of one country's economic and structural characters in determining the role of trade liberalization in environment protection. This paper applies the recent prototype of a Real China's Computable General Equilibrium Model of Roland-Holst and Van der Mensbrugghe (2002). Based on this prototype, we further attribute substitutability between different energy inputs and link pollution emission directly to energy intermediary consumption in the production as done in the TEQUILA model. To capture trade's impact on pollution through technical and efficiency aspects, we also include the potential positive trade-externality into the model through both export and import as in De Melo and Robinson (1990). This paper is different from the TEQUILA model, because instead of directly using the estimated input-based effluents intensities (Dessus, Roland-Holst, & Mensbrugghe, 1994) obtained by matching input data from the social accounting matrix of the United States to the corresponding IPPS pollution data for different economic sectors developed by the World Bank (Martin et al., 1991), we use the actual SO2 emission and fuel energy (coal, oil and natural gas) input data in 18 Chinese industrial sectors from 1991 to 1998 to econometrically estimate (panel data method) China's own energy-specific SO2 emission coefficients. Considering China's important position as a large exporter in wearing apparel, textile, leather and electronic equipment goods, we also consider the “large country” hypothesis for China in the world market of these goods. This CGE model is then calibrated into a detailed SAM of 55 sectors of China for the year 1997. There are four policy scenarios as follows. The Business as Usual (BaU) scenario assumes the Chinese economy will continue under the current situation. To measure the potential economic cost of the new desulfur policy, the Desulfur scenario is carried out in which we apply simply the new desulfur policy. In the Open scenario, only the foreseen gradual tariff reduction promises during 2002–2005 in China are included. Lastly, in the Desulfur + Open scenario, the new desulfur policy is implemented along with the new openness process. To seize the different channels through which trade exerts impacts on environment, we further employ the Divisia index decomposition method to reveal the actual contribution of the different economic determinants in SO2 emission evolution under different policy application. The paper is organized as follows. It first provides a short introduction on the evolution of China's desulfur policies since 1978. Section 3 is dedicated to model specification. After a concise introduction of the different policy scenarios in Section 4, the trade–environment nexus is analyzed in Section 5. Finally, Section 6 concludes. The detailed model specification is available upon request.

The fact that China's WTO accession promise and its desulfur policies will be implemented simultaneously during 2001–2005 offers us a perfect policy background to analyze the trade–pollution nexus in China. In this paper, with the aid of a CGE model, we tried to reveal the actual role of trade in China's environmental situation by combining these two policies into the model construction and simulation. This model offers us the possibility to analyze multiple aspects of the trade–pollution nexus in China, given the country's actual industrial structure and its current industrial policy. Like in most CGE models, we first presume that trade can exert impact on SO2 pollution by enlarging production scales and encouraging industrial structure to become more specialized according to China's comparative advantage characters (both natural endowment and environment regulation characters). We make the trade-externality specification in the model to capture the potential production efficiency gains directly related to trade liberalization. Furthermore, by attributing the substitution possibility to energy intermediary consumption, we are able to trace another possible contribution of trade in pollution reduction—facilitating energy substitution by improving the supply–demand relationship of the cleaner energies through trade activities. Finally, this model also enables us to measure the efficiency of the currently applied pollution levy system in China and to find the necessary emission levy rate growth path for the new desulfur policy. Our result shows that given China's special natural resource endowment situation (rich coal deposits) and its current industrialization strategy, its future economic growth process will turn out to be very polluting, even in the presence of significant technological progress in factor productivity, unless further SO2 emission control measures are adopted. According to the BaU scenario simulation, the potential SO2 emission will increase by 33.17% from 2001–2005. However, the environmental impact of trade, though proven to be “negative”, stays rather modest. The supplementary increase of SO2 purely caused by China's WTO accession is only 1.64%. The specialization under trade liberalization will encourage the industrial composition to lean towards less polluting labor-intensive sectors. In addition, the positive externality of trade that improves production efficiency will also contribute to SO2 emission reductions. Both of these two aspects will then help to cancel out some of the pollution increase caused by economic scale enlargement. We did not find proof for the “pollution haven” hypothesis. Although seemingly ambitious, the new desulfur policy will only induce a very small loss in economic growth. Real GDP growth will only decrease by − 0.95% vis-à-vis BaU scenario. Most of the pollution reduction will be achieved by substitution of the polluting energies (coal) with the other, less polluting energies (oil, electricity) and non-polluting energy (natural gas). The combination of the trade liberalization and pollution control policies seems to give China more flexibility in adapting its economic growth to the new desulfur objective. The presence of trade liberalization has several advantages: • accelerates industrial composition transformation towards less polluting labor-intensive sectors; • enlarges clean energy supply by importing them from other countries and offers producers more capacity to further accomplish their energy substitution procedure; • reinforces the contribution of positive trade externality in raising energy combustion efficiency in production process. And at the same time, the pollution control objective will also encourage producers, especially those in export-oriented sectors, to reduce their energy consumption by imposing a relatively high emission tax (US$2.25 per kg) on their SO2 emissions. Combining all these aspects together, we find that the total economic loss due to the new desulfur policy will be limited to only 0.26% under the presence of trade liberalization, which is remarkably lower than the economic loss in the simple Desulfur scenario (0.95%). Our results, in fact, show a good coordination between these two policies. Our simulation results seem to describe an optimistic future for China's desulfur perspective. In reality, interpreting the model's results for policy decisions requires us to bear in mind the following points: 1. China is still quite an imperfect market with frequent government interferences (e.g. recent policies to support domestic auto industry development and banning new power plants in cities located in the sulfur control zone). The perfectly competitive market suggested in this model might not reflect the total reality of Chinese economy. 2. The model in this paper is actually based on some simplifying assumptions. One of them is to assume that inter-fuel switching is one of the contributors to SO2 reductions. The potential economic cost of the desulfur policy, according to this model, seems to depend on the inter-energy substitutability. Given China's current situation of limited oil and gas supply and heavy reliance on coal, the potential “technology barrier” for this inter-fuel substitution might be more important than what we expected. This is especially true for heavy industries where energy intensities are generally high. Since we chose 0.7 for elasticity of substitution between fuel and non-fuel energy bundles and 0.9 for inter-fuel energy substitution, and considering the relatively short time dimension of 5 years in this paper, whether lower energy substitution elasticity will bring significantly higher economic cost for the new desulfur policy remains to be tested. To check the sensitivity of the selected model arrangement for the substitutability between energies, we further run several simulations with lower energy substitution elasticity. The relative variations of the principal economic factors obtained from the simulations based on relatively lower inter-energy substitution elasticity (moderately lower elasticity at 0.5–0.7 and very low elasticity at 0.3–0.5 for inter-fuel substitution and fuel-electricity substitution, respectively) are listed in Table 10. Though as expected, the economic cost of the desulfur policy will be somewhat higher, we do not observe very important economic cost increases caused by the inclusion of lower substitution elasticity in simulation. The supplementary economic cost coming from the lowest substitution elasticity is about − 1.12% for real GDP with respect to that in the original simulation, which means a total economic cost of − 1.38% (− (1.12% + 0.26%) = − 1.38%) for the desulfur policy.28 Even higher stability can be found in per capita disposable income, which stayed at almost the same level under the three energy bundle elasticity arrangements. The good stability of the model can be explained by the Divisia index decomposition results. Although the lower substitutability will reduce emission abatement capacity of energy substitution process, facing the even higher price hike caused by the new desulfur policy and more rigid energy input mix, the industrial composition transformation will take more flexible adaptation. Therefore, less polluting labor-intensive industries will show an even larger increase of their output share in the total economy. Due to data constraints, we have not been able to consider other methods of reducing SO2 emission in the model specification. Except for the inter-energy substitution, other methods such as before-combustion coal cleaning technologies that decrease the sulfur content ratio of the coal, the cleaner combustion technologies that change the emission effluent ratio of energies and finally the end-of-pipe controlling measures that reduce total emission at the end of combustion procedures may also reduce SO2 emissions. Although the econometrically estimated energy-specific emission coefficients might reflect some original contribution of the above-mentioned desulfur technologies, the time-invariable emission rate used in our dynamic recursive simulations ignores the dynamic aspect of the emission rate, which will benefit from future investments in abatement techniques. Therefore, the emission levy rate growth path suggested by our model might be exaggerated and the simulated economic cost for the new desulfur policy might be even smaller. This will be an interesting continuation of this model when data on pollution controlling technique investment on sector level become available. 4. Our model discussed the contribution of the potential positive externalities on productivity increase and desulfur policy. However we did not include some potential negative externalities in the modeling. One of which is the possible negative feedback impact of pollution on labor's health that in turn causes productivity to decrease. However, given that our time dimension in this paper is only 5 years, we do not believe this negative externality of pollution on health will be important enough to make our simulation results change much. 5. Given limited oil and gas reserves, switching away from coal to the other cleaner energies means China will need to greatly increase its oil imports and to try to expand natural gas supply both from domestic as well as foreign sources. According to the International Energy Agency (IEA) and the Chinese government, in 2003, China's oil imports accounted for over 30% of the country's total annual commercial energy supply, and it had since then replaced Japan and became the world's second largest consumer of crude oil after the USA. IEA considered China to be the “main driver of global oil demand growth”. In the absence of a very elastic world supply for crude oil, we expect the Chinese demand to be a primary driver of rising global oil prices, which might make the inter-energy switching process and the new desulfur policy more costly.