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Carbon pricing and terms of trade effects for China and India: A general equilibrium analysis

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  • Pradhan, Basanta K.
  • Ghosh, Joydeep
  • Yao, Yun-Fei
  • Liang, Qiao-Mei

Abstract

Using country-specific dynamic computable general equilibrium (CGE) models, this paper estimates carbon prices in China and India, and compares the effects of carbon pricing policies under terms of trade effects. Estimated carbon prices are higher in China due to differences in emission intensity and in the rate of deployment of new technologies in the models. Differences in carbon prices open up the possibility of carbon trading between the two countries to achieve mitigation objectives. Further, under assumptions about different exchange rate regimes and international fossil fuel prices, the effects of carbon pricing policies on the two economies are mostly similar in terms of direction but, expectedly, different in terms of magnitude. Terms of trade effects could exacerbate carbon pricing effects to a greater degree in China as the country is significantly more dependent than India on external trade and investment. Policymakers should factor in terms of trade effects while designing or evaluating carbon pricing policies in the two countries.

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  • Pradhan, Basanta K. & Ghosh, Joydeep & Yao, Yun-Fei & Liang, Qiao-Mei, 2017. "Carbon pricing and terms of trade effects for China and India: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 63(C), pages 60-74.
    • Handle: RePEc:eee:ecmode:v:63:y:2017:i:c:p:60-74
    DOI: 10.1016/j.econmod.2017.01.017
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    7. Chang-Jing Ji & Xiao-Yi Li & Yu-Jie Hu & Xiang-Yu Wang & Bao-Jun Tang, 2019. "Research on carbon price in emissions trading scheme: a bibliometric analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 99(3), pages 1381-1396, December.
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