How to achieve the goal of carbon peaking by the energy policy? A simulation using the DCGE model for the case of Shanghai, China

This paper investigates the development trends and variation characteristics of China’s economy, energy consumption and carbon emissions from 2007 to 2030, and the impacts on China’s economic growth, energy consumption, and carbon emissions under the carbon tax policy scenarios, based on the dynamic computable general equilibrium (CGE) model. The results show that during the simulation period, China’s economy will keep a relatively high growth rate, but the growth rate will slow down under the benchmark scenario. The energy consumption intensity and the carbon emissions intensity per unit of Gross Domestic Product (GDP) will continually decrease. The energy consumption structure and industrial structure will gradually optimize. With the economic growth, the total energy consumption will constantly increase, and the carbon dioxide emissions are still large, and the situation of energy-saving and emission-reduction is still serious. The carbon tax is very important for energy-saving and emission-reduction and energy consumption structure optimization, and the effect of the carbon tax on GDP is small. If the carbon tax could be levied and the enterprise income tax could be reduced at the same time, the dual goals of reducing energy consumption and carbon emissions and increasing the GDP growth can be achieved. Improving the technical progress level of clean power while implementing a carbon tax policy is very meaningful to optimize energy consumption structure and reduce the carbon emissions, but it has some offsetting effect to reduce energy consumption.

This thesis investigates the effects of trade on the labour market in Malaysia. Specifically, we study the impact of a tariff cut in the motor vehicle industry on the different occupational wages and employment. Tariffs played an important role in Malaysia’s economic development; from an import-competing economy to an export-oriented economy. The literature on trade, wages and employment for Malaysia is limited because of inadequate occupational data to carry out econometric analysis. To fill this gap, we use a dynamic computable general equilibrium (CGE) model for the Malaysian labour market, MyAGE_LM to analyze the effects of a reduction in motor vehicle tariffs. CGE models have theoretical rigour and extensive analytical capabilities for carrying out policy analysis. This thesis contributes to the literature by (i) Introducing labour supply with nine different occupational groups into the dynamic CGE model for Malaysia and (ii) Analyzing a reduction in the motor vehicle tariff rate in Malaysia. The policy simulation is a 5 per cent cut in the motor vehicle tariff rate. To facilitate the analysis of the tariff cut, the MyAGE_LM model incorporates the labour market mechanism similar to that of Dixon and Rimmer (2003; 2008). The simulation results for the impact of the tariff cut on macroeconomic indicators, sectoral outputs and nine categories of occupational wages and employment are presented. The results are analyzed in terms of major model mechanisms. The macroeconomic results of the tariff cut indicate that in the short run, with the government aiming for revenue neutrality through increased labour taxes, there would be a small welfare gain. We also found that in the short run, exports fell despite real devaluation. So, the export sectors do not benefit in the short run. In the long run, aggregate real wages increase, and there is an economy-wide gain in GDP and aggregate consumption. The sectoral results revealed that most export-oriented industries would experience an increase in output. There are some evident effects on occupational wages and employment. The occupational group that stands out is the semi-skilled occupational group, SklAgriFish. This occupational group experienced the biggest decrease in vacancies. SklAgriFish occupations do well because no workers in this occupation are employed in the motor vehicle industry. Also, a significant proportion of SklAgriFish workers are hired in the export-oriented Agriculture industry, and the Agriculture industry sells to FoodBevTob (which does well in the long run because of real devaluation). The PlantMachOpr occupation does relatively well because a high proportion of these workers is employed in OthMachEquip industry (export-oriented and a winner from tariff cut in the long run). In general, from the MyAGE_LM policy simulation, we find that the tariff cut did not have a significant impact on the labour market. There are only small changes in average real wages and employment. We find damped labour supply effects in both the short and the long run. Semi-skilled occupations gain relative to skilled and unskilled workers. Skilled workers do not do well. They are mainly hired in non-traded industries that scarcely use imported motor vehicles

Developing ‘travelthai’: a dynamic Computable general equilibrium model for tourism of Thailand and case applications on tourism setbacks and tourism-related fiscal policies

Assessing the economic impact of public investment in Malaysia: a case study on MyRapid Transit project using a dynamic computable general equilibrium model

Water–energy nexus: The coupling effects of water and energy policy applied in China based on a computable general equilibrium model

This paper constructs a dynamic computable general equilibrium model to forecast China‘s economy, energy use, and carbon emissions. The fossil energy sector and clean electricity sector are disaggregated in detail to obtain robust results. The analysis results show that the industry and energy structure will obviously change along with a high and stable economy growth trend by 2030. Although energy intensity and carbon emission intensity in China will decrease markedly, carbon emissions will keep rising and will not peak by 2030. Therefore, China‘s government must adopt effective measures to realize the commitment goal.

Comprehensive optimisation of China’s energy prices, taxes and subsidy policies based on the dynamic computable general equilibrium model

The carbon emissions of the power industry account for over 50% of China’s total carbon emissions, so achieving carbon peak and carbon neutrality in the power sector is crucial. This study aims to simulate the impacts of three energy policies—carbon constraints, the development of a high proportion of renewable energy, and carbon trading—on China’s energy transition, economic development, and the power sector’s energy mix. Through the construction of a dynamic computable general equilibrium (CGE) model for China and its integration with the SWITCH-China electricity model, the impact of diverse energy policies on China’s energy transition, economic progress, and the power mix within the electricity industry has been simulated. The integration of the SWITCH-China model can address the limitations of the CGE model in providing a detailed understanding of the specific intricacies of the electricity sector. The results indicate that increasing the stringency of carbon restrictions compels a reduction in fossil energy use, controlling the output of coal-fired power units, and thereby reducing carbon emissions. The development of a high proportion of renewable energy enhances the cleanliness of the power sector’s generation structure, further promoting the national energy transition. Implementing a carbon trading policy, where the entire industry shares the burden of carbon reduction costs, can effectively mitigate the economic losses of the power sector. Finally, the policies to further enhance the implementation of carbon trading policies, strengthen effective governmental regulation, and escalate the deployment of renewable energy sources are recommended.

With large shares in global trade and carbon emissions, China's international trade is supposed to be significantly affected by the proposed carbon-based border tax adjustments (BTAs). This paper examines the impacts of BTAs imposed by USA and EU on China's international trade, based on a multi-sector dynamic computable general equilibrium (CGE) model. The simulation results suggest that BTAs would have a negative impact on China's international trade in terms of large losses in both exports and imports. As an additional border tariff, BTAs will directly affect China's exports by cutting down exports price level, whereas Chinese exporting enterprises will accordingly modify their strategies, significantly shifting from exports to domestic markets and from regions with BTAs policies towards other regions without them. Moreover, BTAs will affect China's total imports and sectoral import through influencing the whole economy in an indirect but more intricate way. Furthermore, the simulation results for coping policies indicate that enhancing China's power in world price determination and improving energy technology efficiency will effectively help mitigate the damages caused by BTAs.

Carbon-based border tax adjustments (BTAs) have recently been proposed by some OECD countries to level the carbon playing field and target major emerging economies. This paper applies a multi-sector dynamic computable general equilibrium (CGE) model to estimate the impacts of the BTAs implemented by US and EU on China's sectoral carbon emissions. The results indicate that BTAs will cut down export prices and transmit the effects to the whole economy, reducing sectoral output-demands from both supply side and demand side. On the supply side, sectors might substitute away from exporting toward domestic market, increasing sectoral supply; while on the demand side, the domestic income may be strikingly cut down due to the decrease in export price, decreasing sectoral demand. Furthermore, such shrinkage of demand may similarly reduce energy prices, which leads to energy substitution effect and somewhat stimulates carbon emissions. Depending on the relative strength of the output-demand effect and energy substitution effect, sectoral carbon emissions and energy demands will vary across sectors, with increasing, decreasing or moving in a different direction. These results suggest that an incentive mechanism to encourage the widespread use of environment-friendly fuels and technologies will be more effective.

With large shares in global trade and carbon emissions, China’s international trade is supposed to be significantly affected by the proposed carbon-based border tax adjustments (BTAs). This paper examines the impacts of BTAs imposed by USA and EU on China’s international trade, based on a multi-sector dynamic computable general equilibrium (CGE) model. The simulation results suggest that BTAs would have a negative impact on China’s international trade in terms of large losses in both exports and imports. As an additional border tariff, BTAs will directly affect China’s exports by cutting down exports price level, whereas Chinese exporting enterprises will accordingly modify their strategies, significantly shifting from exports to domestic markets and from regions with BTAs policies towards other regions without them. Moreover, BTAs will affect China’s total imports and sectoral import through influencing the whole economy in an indirect but more intricate way. Furthermore, the simulation results for coping policies indicate that enhancing China’s power in world price determination and improving energy technology efficiency will effectively help mitigate the damages caused by BTAs.

Malaysia, as one of the top energy subsidizing countries, has announced to remove energy subsidies necessarily, not only to reduce energy consumption and the government budget deficit but also to improve overall efficiency and air quality. Therefore, this study evaluates the impacts of rationalizing energy subsidy and its energy efficiency improvement during 2010–2030 using a dynamic recursive computable general equilibrium model. Results revealed that reducing energy subsidies decreases energy consumption and emissions of all air pollutants. While the economic performance of the country improves in the long run due to stimulation in capital demand and investment, it reduces in the short run. Energy efficiency also improves by 1.1% and 2.3%, in the short run, in response to a reduction of 10% and 100% in energy subsidies, respectively. Energy efficiency improvements decrease the negative effects of pure subsidy policies on real GDP, trade, investment, and household consumption. The efficiency improvement policies also are effective in reducing more level of the rebound effect and lead to more energy saving in the economy, particularly in the petroleum products sector. The impacts on the rebound effect also differ across economic sectors. The results of this study provide new insights for energy subsidy policy and energy efficiency and suggest that additional tools and policies are required for improving the energy efficiency caused by phasing out energy subsidies. Malaysia, as one of the top energy subsidized countries, attempts to reduce the level of energy subsidies over time and, consequently, decline the use of fossil fuels in the economy. Therefore, this study analyzes the impacts of different subsidy reform policy on energy efficiency and, consequently, on economic and environmental performance and rebound effect of Malaysia by a recursive dynamic computable general equilibrium model.

In energy policy, efficiency improvements are conventional means for reducing industrial energy use as well as related environmental and climate externalities. Unfortunately, the effectiveness of energy efficiency improvements in reducing energy use is known to be limited by rebound effects. These rebound effects arise from economic and behavioral responses to the energy efficiency improvements themselves. In this paper, we show that their magnitude critically depends on the substitutability (or complementarity) of energy with different types of capital. These relationships between energy and capital must, hence, be carefully modelled in the context of rebound assessments. To this end, we develop a new, recursively dynamic computable general equilibrium model for Switzerland, which differentiates the capital stock into capital that is substitutable and capital that is complementary with energy. With this model, we simulate average economy-wide rebound effects of 38%; Sector-specific average rebound effects range from negative rebound effects for energy supply sectors to 48% for the energy-intensive manufacturing industry. The sector-specific results crucially depend on the energy and capital intensities of the respective sectors. A sensitivity analysis shows that our more sophisticated representation of capital lowers the simulated rebound effects. Conversely, existing rebound assessments with a homogenous capital stock may overestimate rebound effects. Nonetheless, both economy-wide and industrial rebound effects in Switzerland remain substantial. When devising energy efficiency policies, it is thus essential to evaluate the expected rebound effects and to compensate for them with complementary policies, such as energy and carbon taxes.

This paper examined the macroeconomic influence of tax reform on the Ethiopian economy using the Dynamic Computable General Equilibrium model. It utilized the updated 2009/2010 Ethiopian Social Accounting Matrix (SAM) from 2005/2006 developed by Ethiopian Development Research Institute (EDRI). To investigate the impact of tax reform on the Ethiopian economy, different simulations were made turn by turn. First, a reduction in direct tax by 30% is introduced to see the impacts of direct tax reduction on the economy. As a result, macroeconomic variables such as GDP, absorption, private consumption, government expenditure, import, export, government income, investment, and aggregate output show a considerable improvement. Additionally, there is an increase in factor income and welfare gain for households though the factor supply of labor and land is fixed compared to base case scenarios. On the second simulation, an increase in sales tax by 67% was introduced to examine at the impact of sales tax on the economy. Thus, increases in sales tax improve the overall economic performance compared to direct reduction. However, under the third simulation decrease in import tariff by 24% worsened the general economic performance by encouraging import and depressing domestic output. Based on the finding, encouraging consumption tax reform, protecting the home country from external sector influence to encourage domestic production is the major policy option recommended to bring a good economic performance with lower distortion since we cannot abolish distortion when we conduct tax reform. Key words: Ethiopia, tax reform, tax revenue, macroeconomics performance, dynamic computable general equilibrium.

Aim/purpose – This study sought to assess the impact of an increased historical fixed VAT rate of 14% to the current rate of 15% on the South African economy. Design/methodology/approach – The method applied in this study was based on a Dynamic Computable General Equilibrium (CGE) model to evaluate the impact of both the VAT rate of 14% and a new rate of 15% on the South African economy. The CGE model has been proven over the years to be a suitable model when evaluating the impact assessment of any shock within an economy. Enhancements were made by the researcher to the direct and indirect tax section of the model, i.e., the direct tax section was disaggregated, such that for both firm and household revenues, a dividend income stream is separated from other income streams. The main reason is to facilitate a detailed analysis of Corporate Income Tax (CIT) and Personal Income Tax (PIT), as well as the latest implemented Dividend Tax (DT). Findings – When VAT was increased from 14% to 15%, the immediate reaction of the shock from the Dynamic CGE model indicates that the Gross Domestic Product (GDP) declined by 0.0002% in 2018, but increased by 0.0028% in the following year (2019). The trend continued until 2021, hence the 1% increase in the VAT tax rate will increase the expected forecast of VAT collection by approximately R3.2 billion on average. Research implications/limitations – The findings of this study will be implemented by the South African government, which will use a dynamic CGE model to assess South Africa’s VAT contribution to the economy. The database of the CGE model was limited to the Social Accounting Matrix (SAM) for 2015. Originality/value/contribution – The study recommends the use of this method for assessing the impact of tax policy changes to the South African economy. The CGE model seems to be the best model as far as the impact assessment of a shock in the econ- omy is concerned. This will assist the South African authorities with their decision mak- ing regarding future VAT revenue. Keywords: South African Revenue Service (SARS), Value Added tax (VAT), Dynamic computable general equilibrium (CGE) model. JEL Classification: H21, C68, E62.