A comparative assessment of economic-incentive and command-and-control instruments for air pollution and CO2 control in China's iron and steel sector.

China's iron and steel sector is faced with increasing pressure to control both local air pollutants and CO2 simultaneously. Additional policy instruments are needed to co-control these emissions in this sector. This study quantitatively evaluates and compares two categories of emission reduction instruments, namely the economic-incentive (EI) instrument of a carbon tax, and the command-and-control (CAC) instrument of mandatory application of end-of-pipe emission control measures for CO2, SO2 and NOx. The comparative evaluation tool is an integrated assessment model, which combines a top-down computable general equilibrium sub-model and a bottom-up technology-based sub-model through a soft-linkage. The simulation results indicate that the carbon tax can co-control multiple pollutants, but the emission reduction rates are limited under the tax rates examined in this study. In comparison, the CAC instruments are found to have excellent effects on controlling different pollutants separately, but not jointly. Such results indicate that no single EI or CAC instrument is overwhelmingly superior. The environmental and economic effectiveness of an instrument highly depends on its specific attributes, and cannot be predicted by the general policy category. These findings highlight the necessity of clearer identification of policy target priorities, and detail-oriented and integrated policy-making among different governmental departments.

Intensity-based climate change policies in Canada.

To reduce greenhouse gas emissions from large industries the Canadian government proposed using a tradable emissions performance standard approach, where the intensity of emissions, rather than the absolute level, is regulated. Unlike a cap and trade system, an emissions performance standard does not guarantee a certain overall level of emission reductions, a fact that has led to significant criticism. However, because of the dynamics of performance standards, they may reduce concerns over reductions in international competitiveness in cases where a country has climate policies that are more aggressive than those of some of its trade partners. Likewise, a performance standard may mesh more efficiently with existing taxes and therefore cause less overall economic impact than an absolute cap and trade system. This paper considers the theoretical arguments for and against such a performance standard system and evaluates it in comparison to a cap and trade system using a dynamic general equilibrium model applied to Canada.