Regional Analysis

Markets versus Regulation: The Efficiency and Distributional Impacts of U.S. Climate Policy Proposals

Regulatory measures have proven the favored approach to climate change mitigation in the U.S., while market-based policies have gained little traction. Using a model that resolves the U.S. economy by region, income category, and sector-specific technology deployment opportunities, this paper studies the magnitude and distribution of economic impacts under regulatory versus market-based approaches. We quantify heterogeneity in the national response to regulatory policies, including a fuel economy standard and a clean or renewable electricity standard, and compare these to a cap-and-trade system targeting carbon dioxide or all greenhouse gases. We find that the regulatory policies substantially exceed the cost of a cap-and-trade system at the national level. We further show that the regulatory policies yield large cost disparities across regions and income groups, which are exaggerated by the difficulty of implementing revenue recycling provisions under regulatory policy designs.

Non-nuclear, Low-carbon, or Both? The Case of Taiwan

The Fukushima nuclear accident in Japan has renewed debates on the safety of nuclear power, possibly hurting the role of nuclear power in efforts to limit CO2 emissions. I develop a dynamic economy-wide model of Taiwan with a detailed set of technology options in the power sector to examine the implications of adopting different carbon and nuclear power policies on CO2 emissions and the economy. Without a carbon mitigation policy, limiting nuclear power has a small economic cost for Taiwan, but CO2 emissions may increase by around 4.5% by 2050 when nuclear is replaced by fossil-based generation. With a low-carbon target of a 50% reduction from year 2000 levels by 2050, the costs of cutting CO2 emissions are greatly reduced if both carbon sequestration and nuclear expansion were viable. This study finds that converting Taiwan's industrial structure into a less energy-intensive one is crucial to carry out the non-nuclear and low-carbon environment.

Quantifying Regional Economic Impacts of CO2 Intensity Targets in China

To address rising energy use and CO2 emissions, China's leadership has enacted energy and CO2 intensity targets under the Twelfth Five-Year Plan (2011–2015), which are defined at both the national and provincial levels. We develop a computable general equilibrium (CGE) model with global coverage that disaggregates China's 30 provinces and includes energy system detail, and apply it to assess the impact of the current binding provincial CO2 emissions intensity targets. We compare the impact of the provincial targets approach to a single target for China that achieves the same reduction in CO2 emissions intensity at the national level. The national target assumes trading of emissions allowances across provinces, resulting in the least-cost reductions nationwide. We find that the national target results in about 20% lower welfare loss in China relative to the provincial targets approach. Given that the regional distribution of impacts has been an important consideration in the target-setting process, we focus on the changes in provincial-level CO2 emissions intensity, CO2 emissions, energy consumption, and economic welfare. We observe significant heterogeneity across provinces in terms of the energy system response as well as the magnitude of welfare impacts. We further model the current policy of fixed end-use electricity prices in China and find that national welfare losses increase. Assumptions about capital mobility have a substantial impact on national welfare loss, while changing assumptions about the future availability of domestic natural gas resources does not have a large effect.

The role of China in mitigating climate change

We explore short- and long-term implications of several energy scenarios of China's role in efforts to mitigate global climate risk. The focus is on the impacts on China's energy system and GDP growth, and on global climate indicators such as greenhouse gas concentrations, radiative forcing, and global temperature change. We employ the MIT Integrated Global System Model (IGSM) framework and its economic component, the MIT Emissions Prediction and Policy Analysis (EPPA) model. We demonstrate that China's commitments for 2020, made during the UN climate meetings in Copenhagen and Cancun, are reachable at very modest cost. Alternative actions by China in the next 10 years do not yield any substantial changes in GHG concentrations or temperature due to inertia in the climate system. Consideration of the longer-term climate implications of the Copenhagen-type of commitments requires an assumption about policies after 2020, and the effects differ drastically depending on the case. Meeting a 2 °C target is problematic unless radical GHG emission reductions are assumed in the short-term. Participation or non-participation of China in global climate architecture can lead by 2100 to a 200–280 ppm difference in atmospheric GHG concentration, which can result in a 1.1 °C to 1.3 °C change by the end of the century. We conclude that it is essential to engage China in GHG emissions mitigation policies, and alternative actions lead to substantial differences in climate, energy, and economic outcomes. Potential channels for engaging China can be air pollution control and involvement in sectoral trading with established emissions trading systems in developed countries.

A Review of and Perspectives on Global Change Modeling for Northern Eurasia

Northern Eurasia is made up of a complex and diverse set of physical, ecological, climatic and human systems, which provide important ecosystem services including the storage of substantial stocks of carbon in its terrestrial ecosystems. At the same time, the region has experienced dramatic climate change, natural disturbances and changes in land management practices over the past century. For these reasons, Northern Eurasia is both a critical region to understand and a complex system with substantial challenges for the modeling community. This review is designed to highlight the state of past and ongoing efforts of the research community to understand and model these environmental, socioeconomic, and climatic changes. We further aim to provide perspectives on the future direction of global change modeling to improve our understanding of the role of Northern Eurasia in the coupled human-Earth system. Major modeling efforts have shown that environmental and socioeconomic impacts in Northern Eurasia can have major implications for the biodiversity, ecosystems services, environmental sustainability, and carbon cycle of the region, and beyond. These impacts have the potential to feedback onto and alter the global Earth system. We find that past and ongoing studies have largely focused on specific components of Earth system dynamics and have not systematically examined their feedbacks to the global Earth system and to society. We identify the crucial role of Earth system models in advancing our understanding of feedbacks within the region and with the global system. We further argue for the need for Integrated Assessment Models (IAMs), a suite of models that couple human activity models to Earth system models, which are key to address many emerging issues that require a representation of the coupled human-Earth system.

A recent study estimates that about 1.6 million people in China die each year—roughly 4,000 a day—from heart, lung and stroke disorders due to poor air quality. Most of the nation’s lethal air pollution, including headline-grabbing toxins such as fine particulate matter (PM2.5) and ground-level ozone (O3), is produced in its coal-dominated energy and industrial sectors.

Tackling air pollution in China
China Project
The impact of coordinated policies on air pollution emissions from road transportation in China

A recent study estimates that about 1.6 million people in China die each year—roughly 4,000 a day—from heart, lung and stroke disorders due to poor air quality Most of the nation’s lethal air pollution, including headline-grabbing toxins such as fine particulate matter (PM2.5) and ground-level ozone (O3), is produced in its coal-dominated energy and industrial sectors. But a substantial and growing contributor to the problem is road transportation; as private vehicle ownership and freight traffic increase, so, too, do ambient concentrations of pollutants from gasoline and diesel fuel exhaust.

Concerned about ongoing health risks linked to high concentrations of air pollutants, China has recently taken measures that are expected to improve its air quality. These include an economy-wide climate policy that puts a price on carbon dioxide (CO2) and lowers emissions that degrade air quality, and tailpipe and fuel-economy standards that target vehicle emissions only. What remains to be seen is how effective these measures will be in reducing China’s air pollution problem.   

Addressing that question head-on, a new study in the journal Transportation Research Part D: Transport and Environment evaluates the overall impact on China’s air pollution levels of implementing both an economy-wide climate policy and vehicle emissions standards. Using an energy-economic model, a team of researchers from MIT, Tsinghua University and Emory University finds that by 2030, implementation of China’s current vehicle emissions standards—or more stringent versions thereof—will considerably reduce road transportation’s contribution to the nation’s total air pollution, and that an economy-wide price on CO2 will significantly lower air pollution from other sectors of the economy through incentivizing a transition to less carbon-intensive energy sources such as natural gas and renewables. The researchers conclude that a coordinated policy, combining well-enforced vehicle emissions standards and an economy-wide carbon price, would help enable China to meet both its air quality and climate-change mitigation goals. 

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