The Impact of High-Speed Rail Investment on Economic and Environmental Change in China: A Dynamic CGE Analysis

Abstract

This study investigates the impact of high-speed rail investment on the economy and environment in China using a computable general equilibrium (CGE) model with a focus on the period 2002-2013. The analysis is implemented in a dynamic recursive framework capturing long-run capital accumulation and labor market equilibrium. A national level impact was simulated through direct impact drivers including land use conversion, output expansion, cost reduction, productivity increase, transport demand substitution and induced demand. The results suggest that rail investment in China over the past two decades has been a positive stimulus to both the economy and social welfare, while the effect on CO2 emissions generation has been large. Overall, the economic and welfare contributions of rail investment are achieved primarily through induced demand and output expansion, whereas the contribution from a reduction of rail transportation costs and rail productivity increases were modest. In addition, negligible negative impacts from land use for rail development and the substitution effect among other modes were found. Emissions reduction from substitution of rail for other modes was small and overwhelmed by output expansion due to lowered rail transport costs and induced demand.