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GTAP Resource #4083

"Macroeconomic impacts of carbon capture and storage in China"
by Vennemo, Haakon, Shantong Li and Jianwu He

Carbon capture and storage (CCS) is a key technology for reducing greenhouse gas emissions. But a CCS facility consumes vast amounts of energy and capital. With this in mind we analyze macroeconomic consequences of a large scale introduction of CCS in China. We modify and extend the dynamic recursive DRC-CGE, a macroeconomic CGE model of the country that is used for long-term planning and policy analyses. We modify the model by introducing technologies for CCS in fossil fuel based power production, and we extend the social accounting matrix in order to link the CCS technologies to the input-output matrix of the economy.

We analyze an internal finance scenario of domestic funding, and an external finance scenario of international funding. In the external finance scenario CCS is installed on 70 percent of all power plants by 2050. This increases demand for coal by one fifth and import of coal by one fourth. The strain on coal resources may be an important political concern for China. In the internal finance scenario coal resources are not strained since this scenario introduces a price on carbon that lifts prices of energy. Moreover, because the price on carbon cuts across the board the internal finance scenario is much more effective at reducing CO2. On the other hand, in this scenario GDP goes down about four percent, which also raises political concern. We have shown in this paper that introducing CCS on a large scale has challenges in addition to the technological aspects. In an emerging economy such as China the most realistic option may be for the international community to finance CCS. This option however implies a fairly strong increase in the demand for coal, with concurrent increases in transportation and water demand, as well as a strong increase in coal import. The increase in coal import may pose a particular worry for Chinese policy makers, who are concerned with energy security and search for policies that reduce energy import.

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Created: He, J. (4/9/2013)
Updated: He, J. (4/15/2013)
Visits: 1,334
- Climate change policy
- Asia (East)

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