Abstract
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.
Highlights
Population growth and rapid economic development in recent decades have dramatically aggravated water pollution and water withdrawal in China, while climate change is resulting in an increasingly uncertain water supply and places additional pressure on constrained freshwater resources [1,2,3]
The low discharge fees led to high wastewater pollution; low water prices did not encourage companies to recycle water, reduce usage and reduce
We focus on Chemical Oxygen Demand (COD), a measure of the oxygen needed to dissolve organic matter in wastewater, since it is regarded as the most important form of water pollution in
Summary
Population growth and rapid economic development in recent decades have dramatically aggravated water pollution and water withdrawal in China, while climate change is resulting in an increasingly uncertain water supply and places additional pressure on constrained freshwater resources [1,2,3]. A series of policies have been proposed by the Chinese government to address the challenges posed by water shortage and water quality degradation. Wastewater Discharge Fees were based on treatment costs under the “Regulations on Collection, Use &. The low discharge fees led to high wastewater pollution; low water prices did not encourage companies to recycle water, reduce usage and reduce. China’s total wastewater discharge has steadily risen from 41.5 billion tons in 2000 to 73.5 billion tons in 2015 [4]. In recognition of these problems, China reformed and reinforced its environmental regulations with respect to water. The new Environmental Protection Law (EPL), enacted in January 2015, has become the most progressive and stringent law in the history of environmental protection in
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