Analyses | 02 July 2008

China can grow and still help prevent the tragedy of the carbon dioxide commons

Under reasonable assumptions, China could achieve parity in living standard with Western Europe by 2100, and India by 2150. Climate change, however, may be a key obstacle preventing such a convergence.Warwick McKibbin , Peter J. Wilcoxen , Wing Thye Woo

  • Warwick McKibbin
  • Peter J. Wilcoxen
  • Wing Thye Woo

Under reasonable assumptions, China could achieve parity in living standard with Western Europe by 2100, and India by 2150. Climate change, however, may be a key obstacle preventing such a convergence.Warwick McKibbin , Peter J. Wilcoxen , Wing Thye Woo

  • Warwick McKibbin
  • Peter J. Wilcoxen
  • Wing Thye Woo
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Executive Summary

This paper uses a dynamic multi-country model (the G-Cubed Model) to project a realistic BAU trajectory of CO2 emissions for China, and we find it to be even above the CO2 emissions from the high-growth scenario estimated by the Energy Information Agency in 2007. This outcome is a reminder that it has been usual so far to underestimate the growth in China energy consumption. The paper then compares the merits of the different market-based CO2 reduction mechanisms in China like a carbon tax, a cap-and-trade emissions trading scheme, and the McKibbin-Wilcoxen Hybrid (MWH) emissions trading approach.