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Industrial Water Pollution Discharge Taxes in China: A Multi-Sector Dynamic Analysis

State Key Laboratory of Hydroscience and Engineering, Department of Hydraulic Engineering, Tsinghua University, Beijing 100084, China
School of Engineering and Applied Sciences, Harvard University, Cambridge, MA 02138, USA
Environment and Production Technology Division (EPTD), International Food Policy Research Institute, Washington, DC 20006, USA
College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China
School of Economics and Management, Tsinghua University, Beijing 100084, China
Department of Civil Engineering and Environmental Science, University of Oklahoma, Norman, OK 73019, USA
Authors to whom correspondence should be addressed.
Water 2018, 10(12), 1742;
Received: 4 November 2018 / Revised: 22 November 2018 / Accepted: 23 November 2018 / Published: 27 November 2018
(This article belongs to the Collection Water Policy Collection)
PDF [3737 KB, uploaded 13 December 2018]
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We explore how water pollution policy reforms in China could reduce industrial wastewater pollution with minimum adverse impact on GDP growth. We use a multi-sector dynamic Computable General Equilibrium (CGE) model, jointly developed by Harvard University and Tsinghua University, to examine the long-term impact of pollution taxes. A firm-level dataset of wastewater and COD discharge is compiled and aggregated to provide COD-intensities for 22 industrial sectors. We simulated the impact of 4 different sets of Pigovian taxes on the output of these industrial sectors, where the tax rate depends on the COD-output intensity. In the baseline low rate of COD tax, COD discharge is projected to rise from 36 million tons in 2018 to 48 million in 2030, while GDP grows at 6.9% per year. We find that raising the COD tax by 8 times will lower COD discharge by 1.6% by 2030, while a high 20-times tax will cut it by 4.0%. The most COD-intensive sectors—textile goods, apparel, and food products—have the biggest reduction in output and emissions. The additional tax revenue is recycled by cutting existing taxes, including taxes on profits, leading to higher investment. This shift from consumption to investment leads to a slightly higher GDP over time. View Full-Text
Keywords: water pollution policy; CGE model; industrial COD discharge; pollution discharge tax; China water pollution policy; CGE model; industrial COD discharge; pollution discharge tax; China

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Guo, X.; Ho, M.S.; You, L.; Cao, J.; Fang, Y.; Tu, T.; Hong, Y. Industrial Water Pollution Discharge Taxes in China: A Multi-Sector Dynamic Analysis. Water 2018, 10, 1742.

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