Employing a CGE model in analysing the environmental and economy-wide impacts of CO2 emission abatement policies in Malaysia

Economic and environmental analysis of Malaysia's 2025 renewable and sustainable energy targets in the generation mix

In pursuing the goals of sustainable development and transiting from fossil fuel-dependent electricity generation to renewable and sustainable alternatives as endorsed by COP28, Malaysia set a 31 % target for renewable-energy in the power generation mix by 2025. This underlines Malaysia's commitment to combat climate change, mainly by reducing its economy-wide GDP carbon intensity by 45 % from the 2005 levels by 2030. To better understand the effects of renewable energy expansion on the economy, environment, electricity output and input-mix, a computable general equilibrium model is applied using an updated benchmark. The simulation results show that increasing the share of coal and gas in the power generation mix compromises emission reduction targets. Further, there is a trade-off between subsidized natural gas supplies and power generation and exports. The results also show that a larger proportion of renewable energy leads to improved welfare. As the share of gas and coal in renewable energy generation is not very high, its impact on carbon emissions is limited. However, if renewable energy expansion is complemented by subsidy rationalizations, the positive impacts are more pronounced. In terms of policy implications, the findings suggest that Malaysia must step up its emission reduction efforts by augmenting the generation of renewable rather than non-renewable resources. Complementary initiatives such as emission abatement policies and consumption subsidies for refined oil products and fossil-fuel power generation should be rationalized to expand renewable resources, improve energy security, and attain emission reductions.

Contribution of the carbon tax, phase-out of thermoelectric power plants, and renewable energy subsidies for the decarbonization of Chile - A CGE model and microsimulations approach

There are various climate policies to decarbonize the energy matrix of a country. In the case of Chile, a carbon tax of 5 USD/tCO2 was initially implemented, and later, a schedule was established for the phase-out of coal-fired thermoelectric plants, all the above in the absence of subsidies for non-conventional renewable energy (NCRE). This study uses a computable general equilibrium (CGE) model and microsimulations to assess the contribution of current climate policies and other more demanding scenarios that accelerate the decarbonization of the Chilean energy matrix, considering economic, environmental, and distributional impacts. Specifically, carbon taxes are simulated with and without complementary climate policies (phase-out of coal-fired power plants and NCRE subsidies). The results show that the scenarios that combine the three climate policies generate a greater decrease in greenhouse gas emissions (40.4% ∼ 57.5%). Besides, the drop in GDP is more pronounced when coal-fired thermoelectric plants phase out (0.3% additional), and NCRE subsidies contribute to moderately reducing emissions. However, NCRE subsidies reduce the negative effect on households' expenditure and income, especially in the poorest quintile. Finally, microsimulations show marginal changes in income distribution and an increase of up to 0.4 percentage points in the poverty rate.

Short-Term and Long-Term Impacts of Air Pollution Control on China's Economy

To deal with severe air pollution arising from rapid development, a series of air pollution control policies have been implemented in China. Previous literature has explored the short-term economic impacts of air pollution control, but the long-term economic impacts, which can better reflect the effectiveness of air pollution control, have received less attention. This paper has constructed an integrated assessment framework combining a multi-sectoral computable general equilibrium (CGE) model, air quality estimation module, and health impact module, to explore the short-term (2016) and long-term (2030) impacts of air pollution control on China's economy, by setting 2015 as the base year. The possible future air pollution reduction scenarios were set based on the Thirteenth Five-Year Plan (FYP13) proposed by the Chinese government. Our results have shown that air pollution control would harm China's economy and such adverse effects would be increased by stricter pollution reduction targets. Taking the health benefits of air pollution control into account can effectively alleviate the GDP losses, and even reverse them into economic benefits in the long term. Compared with business-as-usual (BAU) scenario (no policy constraints on SO₂ and NO_x emissions), the impact of air pollution control on GDP in the TAC_VIII scenario (emission reduction targets of 20% for SO₂ and NO_x are set every five years after 2015) would change from a loss of 1.20% in 2016 to an increase of 0.28% in 2030. Our results can provide policy implications for the optimization of China's air emissions control in the future.

The asymmetric effect of environmental policy stringency on CO2 emissions in OECD countries

This paper uses a quantile fixed-effect panel data approach to investigate how environmental policy stringency affects CO₂ emissions in a set of 32 countries from 1990 to 2015, using OECD data. This approach allows us to identify the asymmetric impact of policy stringency on emissions, considering the emission level recorded in each analysed country. More precisely, we posit that the effectiveness of environmental regulations and policies is influenced by the air pollution level. Our results show that an increase in policy stringency has a negative impact on emissions and that environmental stringency has a more powerful impact in the countries with lower levels of carbon emissions. In addition, we show that policy stringency measures only became effective after the implementation of the Kyoto agreement, whereas the policy stringency effect is stronger for EU countries at high risk of missing the 20-20-20 target in terms of greenhouse gas emissions. Lastly, policy implications refer to the need to adapt policy stringency measures to emission levels to increase their effectiveness. At the same time, the setting up of emission targets determines policymakers to be more engaged in the fight against carbon emissions.

Does fuel tax decrease carbon dioxide emissions in Turkey? Evidence from an asymmetric nonlinear cointegration test and error correction model

Excise taxes on fuel consumption may serve an important role in the abatement of CO2 emissions. Fuel tax has been a significant revenue-raising tool in Turkey for years. The present paper investigates whether there is a relationship between carbon dioxide emissions and public revenues from excise taxes on fuel consumption in Turkey by employing an asymmetric nonlinear cointegration test and error correction model that is a novel methodology proposed by Hepsag Commun Stat-Simul Comp 50:400-412, (2021). We collect our sample that consists of annual data on CO2 emissions, GDP, and fuel tax in Turkey from 1985 to 2018. The empirical findings display that there exist relationships among economic growth, CO2 emissions, and fuel tax supporting the environmental Kuznets curve (EKC) hypothesis in the short and long run. However, we find out that fuel tax is statistically insignificant and has no impact on CO2 emissions. Because a significant carbon dioxide reduction is not possible by fuel taxation, by converting the excise tax on fuel consumption into a carbon tax, a considerable emission reduction can be provided efficiently.

Recycling Carbon Tax under Different Energy Efficiency Improvements: A CGE Analysis of China

Carbon emission reductions and sustainable development have become hot issues in international conferences. As the most direct instrument for carbon emission reductions, the carbon tax has not been favored by policymakers because of its negative effect on the economy. To achieve low-carbon sustainable development, we use a computable general equilibrium (CGE) model to simulate carbon tax recycling under different energy transfer efficiency improvements to achieve triple dividends of carbon emission reductions and social welfare improvement. This paper contributes to the literature on recycling carbon tax for triple dividends in China. The simulation has three main findings: (i) the carbon tax revenue recycling toward reducing the resident income tax rate yields triple dividends without any energy transfer efficiency improvement; (ii) the losses of GDP and social welfare are exaggerated. Meanwhile, the carbon tax brings down carbon emissions and total carbon intensity of GDP with a mild impact on the Chinese economy; (iii) the improvement of energy transfer efficiency demonstrates the advantages of recycling carbon tax and is essential for achieving triple dividends. Thus, we propose the following policy recommendations: (i) the pilot carbon tax mechanism should be launched in high-carbon sectors (such as coal) and then implemented in other industries gradually; (ii) the government should strongly support the technological improvement of energy transfer efficiency in order to achieve sustainable development.

Measurement of the Degree of Coordination in Regard to Carbon Emissions, Economic Development, and Environmental Protection in China

Driven by economic development, the dramatic increase in carbon emissions has led to global warming and a series of environmental problems. The question of how to ensure harmonized coordination between economic development, carbon emissions and environmental protection has become increasingly important. The conflicts between the use of energy and emission reductions in China have become more intense. It is an inevitable requirement for China’s sustainable development to promote a low-carbon circular economy and the simultaneous and coordinated development of carbon emissions, the economy and the environment. The present study took 30 provinces (municipalities and autonomous regions directly under the Central Government) as the research objects (Tibet, Hong Kong, Macau, and Taiwan are not included in the study due to the lack of relevant data), and applied quantitative analysis methods, such as three-stage data envelopment analysis (DEA) models, coupling coordination degree models and spatial analysis models, to construct a measurement index system. On the basis of the measurement of its carbon emission efficiency, the level of China’s coordination degree in regard to carbon emissions, economic development, and environmental protection at both spatial and temporal dimensions was analyzed comprehensively in order to reveal its temporal and spatial characteristics. The conclusions are as follows: (1) China’s overall carbon emission efficiency displayed a gradual upward trend, although the overall level was not that high. Therefore, there is still much scope for further improvement. (2) The level of China’s coordination degree in regard to carbon emissions, economic development, and environmental protection showed a steady yet rising trend. All provinces reached different levels of coordination development, and there was no province that displayed a disorderly declining trend. However, the number of provinces that reached or went beyond the intermediate level of coordination development was quite limited. (3) The level of China’s coordination degree in regard to carbon emissions, economic development, and environmental protection displayed obvious spatial aggregation patterns at the provincial level, showing an apparent spatial dependence and heterogeneity. Over time, the level of spatial aggregation patterns in regard to coordination degree tended to weaken. Overall, the values were high in the eastern region and low in the western region, decreasing from the eastern coastal zone towards the western inland zone, thus demonstrating a contrasting east-west spatial distribution pattern.

A Review of Climate Economic Models in Malaysia

This paper presents a review of literature on the development of climate economy models in Malaysia from 1988 to 2020. The type of climate economic models used in Malaysia and their attributes were analyzed. The key attributes reviewed include functions, capability, the various approaches, types of Greenhouse gas (GHG) emissions, and various sectors included in the modelling. The review analysis revealed that climate economic modelling in Malaysia can be categorized into two groups namely Input-Output (I-O) table and Social Accounting Matrix (SAM) models as well as the Integrated Assessment Models (IAM). Both groups of climate economic models complement each other in functional capability to do top-down or bottom-up as well as short-term and long-term analysis. The key contribution of this review is in discovering three key gap clusters that exist in climate economic modelling in Malaysia. These gaps include the coverage on types of GHGs, disclosing the GHG sector’s coverage in the modelling, and the discovering of the exclusion of climate damage functions as well as the unavailability of customized functions to suit Malaysia’s climate and geography. These three key gaps need to be urgently addressed for effective policy interventions in Malaysia and to meet the global goals of the Paris Agreement.

A review on Malaysia's solar energy pathway towards carbon-neutral Malaysia beyond Covid'19 pandemic

COVID'19 pandemic has devastated several industries and solar energy is no exception. In its economic relief package, Malaysia has announced approximately US$ 2.9 billion in expenditure for the installation of new grids, LED street lights and rooftop solar panels. The Government will also open the tender for a 1400 MW solar power project in the year 2020, which is expected to generate 5 billion ringgit (US$1.1 billion) in investments. As these measures are intended to sustain the existing growth of solar energy potential in the country, it is vital to assess its status quo. Hence, this paper aims to review the current status of renewable energy in Malaysia as well as the initiatives taken before the pandemic to promote solar photovoltaic (PV) technology to meet the energy demands through the low-carbon pathway.

Employing the CGE model to analyze the impact of carbon tax revenue recycling schemes on employment in coal resource-based areas: Evidence from Shanxi

Whether or not the carbon tax is conducive to alleviating the pressure on employment reduction in coal resource-based areas is a subject worthy of in-depth study. We take the province of Shanxi, a typical coal resource-based area in China, as an example, and use the dynamic computable general equilibrium (CGE) model to simulate the impact of carbon tax on employment under various carbon tax revenue recycling schemes. We disaggregate the employment effect into demand effect, cost effect, factor-shift effect, and investment-pull effect to analyze the transmission path of the influence of carbon tax on employment. The results show that the carbon tax is conducive to alleviating the pressures on employment reduction in coal resource-based areas. Compared with the scenario of no carbon tax revenue recycling, the pressures on employment reduction under the scenario where carbon tax is returned to residents or enterprises in different forms, are allayed. More into detail, carbon tax has the least inhibiting effect on industry employment in case that tax revenue is returned to residents in the form of transfer payment. In addition, there is a prominent difference in the transmission path through which the carbon tax promotes employment, that is, the single effect, or the combination of demand effect, cost effect, factor-shift effect, and investment-pull effect. However, the carbon tax would obstruct employment principally through the demand effect.

How quota allocation affects the unified ETS of China: a simulation with dynamic CGE model

The national unified carbon trading market has been officially launched at the end of 2017. The carbon emission quotas should be primary concern, which can be allocated in the form of free and paid ways. However, few literatures studied the economic and environmental impacts of quotas allocation. Thus, this paper constructs 7 scenarios and employs a dynamic, recursive computable general equilibrium (CGE) model to simulate carbon trading market, to probe the relationship between quota allocation and carbon price, and the economic and environmental impact of carbon trading scheme (ETS). Empirical results indicate (1) carbon price has an upward trend with time, which reflects a corresponding increase in emission reduction pressure. Specifically, carbon price increases from 12.44-90.57 CNY/t in 2017 to 65.20-523.44 CNY/t in 2030. In addition, whether under carbon intensity criterion (CIC) or carbon emission criterion (CEC), there is a positive relationship between carbon price and free allocation ratio due to the change of the relationship between supply and demand of quota. With a given free allocation ratio, the price formed with CIC grows faster than that with CEC. (2) Compared with the benchmark scenario, the GDP of China decreases in all scenarios. However, a high level of free allocation ratio combined with CIC may prevent GDP dropping too fast. (3) As for industrial output, covered industries in ETS undertake the largest output losses with an average decline by 4.03-13.60%. Similar to GDP variation, a high free allocation ratio combined with CIC is helpful for sustainable development of industry. (4) Carbon trading has a remarkable effect on emission reductions both in covered and uncovered industries of ETS. Free allocation will reduce market efficiency, which implies it should be cut down gradually at the later stages.

Does "replacing business tax with value-added tax" promote the energy efficiency of the logistics industry in China?

This paper investigates the relationship between "replacing business tax with value-added tax" (RBTVT) and the total factor energy efficiency (TFEE) of the logistics industry using regression discontinuity (RD) method, and the research shows that the TFEE of the logistics industry in China has presented a benign growth trend. RBTVT has significantly promoted the development of TFEE in the logistics industry, and its influence has mainly stemmed from the improvement of green technology progress. Moreover, the promotion mechanism of policy in the eastern region reacts more sharp than that in the central and western regions does. So this paper claims that the government should built a tax incentive mechanism of green production and energy conservation. It is necessary to use RBTVT to promote the high-quality development of the logistics industry and create an environment which coexist low-carbon environmental protection and economic benefits.

Environmental Benefits of Engine Remanufacture in China's Circular Economy Development

China has recently implemented broad strategies aimed at achieving a circular economy by providing subsidies for the remanufacture industry and setting a target of 15% increase in energy efficiency in industrial production across sectors, among other strategies. Here, we examine the environmental implications of these policies in the context of engine remanufacture, using an environmental computable general equilibrium (CGE) model. Results indicate that both the subsidy policy and energy efficiency improvement target can contribute to economic growth and emission reductions, but the subsidy policy is estimated to have far greater impacts. The implementation of both can reinforce each other, generating higher economic and environmental benefits than the sum of each occurrence alone. Another major finding from our model is that an additional remanufactured engine only displaces 0.42 (90% confidence interval from 0.32 to 0.47) of a new engine (comprised of new parts), mainly because the lower prices of remanufactured engines lead to greater consumption. This ratio is much lower than the 1:1 perfect displacement commonly assumed in life cycle assessment (LCA) studies. Overall, our study suggests that the subsidizing of engine remanufacture in China can help promote the industry, improve overall economic welfare, and contribute to environmental targets. Our study also contributes to the estimation of more realistic product displacement ratios in LCA.

Spatial-economic optimisation of biomethane injection into natural gas grid: The case at southern Malaysia

Energy is widely used in industry for heating and cooling, with natural gas (NG) being the largest primary energy source in Malaysia, closely followed by coal. Renewable energy, such as biogas upgrading to biomethane, could cut the use of fossil fuels by supplementing NG usage due to their similar physicochemical and thermochemical characteristics. Biogas production plants in Malaysia are more commonly seen in waste-to-energy scenarios, with the technology anaerobic digestion, and their deployment is supported via feed-in tariffs (FiT) for power generation. Other potential applications such as the conversion of biogas into biomethane, injection into the natural gas grid or transportation through a virtual pipeline may still need further technical development. This paper presents spatial techno economic optimisation modelling using BeWhere to determine decentralised biomethane production plants using feedstock from multiple sources of biogas, including palm oil mill effluent (POME), food waste, cattle manure and chicken manure. This model considered potential configurations and sizes of the biomethane plants, the transportation of biomethane using a virtual pipeline (at 250 psig) and demand in one of the states in Malaysia, namely Johor. It was found that two to four biomethane plants with capacities ranging between 125 and 700 m³/h were located in densely populated areas or heavier industrial consumers when the carbon tax was implemented at 167.71 EUR/tCO₂ (800 MYR/tCO2). Sensitivity analysis suggested that biomethane production increases with the increasing country renewable energy share target to beyond 2080 MW. It is recommended that specific policy regulations and Feed-in Tariff (FiT) mechanisms are used to expand the biomethane market share in the country.

Research on the Spatial–Temporal Synthetic Measurement of the Coordinated Development of Population-Economy-Society-Resource-Environment (PESRE) Systems in China Based on Geographic Information Systems (GIS)

The issue of how to realize the coordinated development of various elements in human–land systems, or, in other words, how to achieve the coordinated development of population-economy-society-resource-environment (PESRE) systems, has become an important topic, which has received global attention. This study takes 31 provinces in China as the research objects, and carries out the research on the spatial–temporal synthetic measurement of the coordinated development of PESRE systems. The conclusions are as follows. From 1995 to 2015, the process of change of coupling coordination degree of China’s PESRE systems can be divided into two types: Rising first and then declining, and fluctuant continuously. The number of provinces of the first type was higher, and most provinces were on the verge of uncoordinated development status or in a weakly coordinated development status. The coupling degree of PESRE systems at the provincial level in China generally shows some positive spatial correlations, and the level of coordinated development displays some obvious spatial aggregation patterns. Moreover, the degree of such aggregation first increases and then weakens. The eastern parts of China represent the main “high-high” type aggregation regions. The central and western parts of China represent the main “low-low” types, account for the largest proportion, and display obvious aggregation characteristics.

Economic and Efficiency Analysis of China Electricity Market Reform Using Computable General Equilibrium Model

China’s electricity industry has been undergoing a process of regulatory reform. This study aims to analyse the impact of liberalization on the electricity market assuming different degrees of scope of the reforms by applying a computable general equilibrium (CGE) model. In this paper, we consider the three sub-sectors of the electricity industry, namely generation, transmission and distribution. We assume that the reform will phase out the entry barriers on the generation side and allow for competition on the distribution side, while keeping the transmission side under regulation. The results showed that the reform could enhance efficiency in the electricity sector and reduce energy prices for households. Introduction of a complete competition model would decrease welfare by 5.394 billion yuan, if contrasted to a limited competition model. The composite energy price would decline under both scenarios, whereas the quantity of energy consumed by the households would go up. This research, thus, contributes to literature on the economic effects of China’s electric power market reform, and can be used as a case study to support policy decisions for the decision-makers.