Chinese Water Pollution Abatement: An Analysis Based On Dynamic CGE Model And Policy Assessment

With the surge of population, industrialized and urbanized development and higheconomic growth, China is facing the severe deterioration situations of water crisis,water depletion, water pollution and water quality-induced water shortage. In thefuture, even though Chinese economic growth may likely to slow down, but thepressure of water demand and constraints of water pollution emissions are stillmoving on. The12thFive-Year-Plan period is a critical period for achieving thewell-off goals in2020, and also the significant period of controlling pollutantemissions and improving the water quality. Out of the “pollution first, treatment later”wired circle, how to combine the problem of maintaining the social economicdevelopment with rational utilizing and protecting water resource in the meantime, isa vital issue in the modernization and sustainable development. Based on this point,this dissertation focuses on controlling water pollution, taking full consideration ofthe complexity and intrinsic links of the three objects: water resource, water pollutionand economic system, with the theory of environmental economics and generalequilibrium. Take the technology reduction and structural reduction as the main line,and the CGE（Computable General Equilibrium）model as the tool, this researchprobes into the enterprises’ initiative of controlling water pollution from the microlevel, and water pollution tax policy from the macro level, and these comprehensiveassessments probably bring dynamic effects, so designing the policy to control waterpollution undoubtedly have momentous theoretical and practical significance.This dissertation’s train of thought is accordant with the LiteratureReview-Present Situation Analysis-Theoretical Modeling-Policy Simulation-PolicyRecommendation. Firstly, it systematically combs the literature of impact factors ofthe pollution emission, water pollution control measures and policy instruments, andthe cost of water pollution abatement policy, focusing on the literature of waterpollution abatement and CGE model. After exploring these literatures, thisdissertation identifies the structural analysis tool as methodology, and considers thesystematical and dynamic mechanism to discuss the idea of technology and taxabatement policy. Subsequently, it summarizes the present status of water resourcesconsumption and water pollution control, taking the paper industry, one of the mostserious water pollution industries, as a case to a detailed analysis. Based on the Chinese MCHUGE model which has already been applied in thefield of dynamic computable general equilibrium, combining Chinese water pollutionemissions and control characteristics, this dissertation builds the dynamic generalequilibrium model MCHUGE-WPA for the water pollution control. By adding waterpollution emissions module in MCHUGE model, the coefficient of industrial waterpollution is updated to2010. In addition, the water pollution decomposition module isintroduced. Through the distinguish of the “new enterprises” which take the waterpollution treatment and “old enterprises” which are not, the water pollution abatementmeasures in terms of closing small old factory, the investment in the wastewatertreatment facilities and ongoing operation cost by new industry are simulated. In orderto evaluate the effect of water pollution tax, the tax module is added into core model,for calculating tax revenue and setting the appropriate tax rate. On the basis of theaforementioned modules and taking the paper industry as an example, according to the1997historic data, it splits the old and new enterprises, while introducing database forthe water pollution emissions and water pollution tax. Based on realistic data of2005-2010, the historical baseline of macroeconomic is renewed, and themacroeconomic forecasting simulation baseline according to the judgment of Chinesefuture economic growth is set. Moreover, the baseline respecting water pollution ofabatement measure of paper industry is established.Water pollution reduction needs the investment of fixed assets and the incurringoperating costs. Based on this, this dissertation is based on MCHUGE-WPA model,taking paper industry as example, separately simulates the dynamic effect of these twomeasures on macro-economy, industrial structure and water pollution emissions.Compared to technology measure to reduce water emissions, the water pollution taxwhich is a current hot topic belongs to market-oriented measure. As to thecomplicated tax design, this dissertation adopts two representative water pollution taxprograms to conduct a comprehensive assessment. At the national level, in accordancewith the present emission standard to charge key industries the COD tax, thesimulation result shows that a certain negative impact on economic growth, the paperindustry suffers for bearing a higher tax burden. Impacted by the exporter demanddecline, the leather manufacturing output declining is obvious, also drives theupstream livestock industry’s declining, on the environmental aspects, the total CODemissions falls more obviously. If tax is collected from all industries in terms of allwater pollutants other than COD at the district level, the chemical fiber and chemicalproducts industry has become a new major damaged industry, what’s more, the overall GDP decrease is more serious. Environmental decomposition simulation shows thatthe short-term industrial structure change is the key factor for pollution emissions’decrease, and the long-term internal economic scale becomes more evident.In summary, whatever is investment in emission reduction through technologyway or means of water pollution tax, a single policy effect is not as good as the effectof combining both measures. On one hand, technology should be encouraged to reducethe emissions. The policy should not only pay attention to the one-time investment inenvironmental protection facilities costs, more importantly should focus on therunning costs of corporate pollution. On the other hand, as for the structural reduction,the role of water pollution tax in price regulation should be paid much attention towhile considering regional difference on water quality, water resource and a variety ofindustry differences of the pollutants intensity as well.The contribution of this dissertation are summed up as follows:I. After systematically reviewing the literatures, the coupling relationship ofeconomic system and environmental system is identified. This dissertation exploresthe issue of water pollution abatement by evaluating both the effect of increasinginvestment and water pollution taxes in systematic manner applying quantitativemethod.II. The dynamic CGE model of water pollution abatement is developed.III.The economic and environmental dynamic effect of water pollution abatementinvestment policy and water pollution tax are comprehensively assessed.