Environmental Policy Analysis: An Environmental Computable General-Equilibrium Approach for Developing Countries

Environmental pollution is now a serious problem in many developing countries. One approach to combat the problem is to implement various pollution control policies. However, due to a lack of adequate quantitative models, the economic impacts and effectiveness of many pollution control policies are still unknown. This article uses the computable general-equilibrium (CGE) approach to develop an integrated economic and environmental model for environmental policy analysis for developing countries. The model presented here incorporates various environmental components, including pollution taxes, subsidies, and cleaning activities, into a standard CGE framework. The study also presents an environmentally extended social accounting matrix (ESAM), which serves as a consistent data set for calibrating the model. The model is applied to China, the largest developing country in the world, for evaluating the effectiveness of Chinese environmental policies on pollution control and their impacts on the Chinese economy. The environmental policies under scrutiny include pollution emission taxes and pollution abatement subsidies. The economic impacts of the waste water treatment plan in China’s recently launched five-year environmental protection