Climate Change in China - Case Study Example

Climate Change in China Student’s Name Institutional Affiliation Date Climate Change in China Abstract Climate change is a global concern, and China being a rapidly developing country, it is significantly affected by the climate change issue. The report has therefore taken to discuss some of the economic issues associated with climate change in China. As the report has documented, most of the economic problems are related to infrastructure and agriculture China being an intensive infrastructural country. The report has also evaluated some policy options that are intended to address the climate change issue in China include Carbon tax policy and the policies regarding electricity consumption and vehicle fuel usage. Additionally, the report has recommended the carbon tax policy as the best policy which would help China thrive economically even in the face various effects of climate change. Table of Contents Abstract 2 Table of Contents 3 Introduction 4 Economic Issues of Climate Change 4 Policy Options 7 Carbon Tax 8 Policy of Excise on Generation of Electricity 8 Policies on Vehicle Fuel Economy 9 Recommended Policy Approach 9 Research Gap 10 Conclusion 11 References 12 Introduction China is considered to be a rapidly-developing country and therefore it has over time been vulnerable to the multiple adverse impacts of climate change. China has a large population and at the same time associated with rather low economic development levels as well as a fragile eco-environment and complex climate change (Xuejie et al., 2001). These threats related to climate change and unsustainable environmental conditions has presented various threats to that country especially in the fields of forestry, eco-fragile environment and coastal zones, water resources, livestock breeding, and agriculture (Yihui et al., 2007). The multiple pressures that China has are to eliminate poverty, develop their economy, as well as to lessen the outcomes of climate change which have been challenging for that country mainly because it has been undergoing significant economic development (Ding et al., 2007). However, despite the challenges, China has realized that they need to develop some economic policies which are intended to address the climate change issue and it has ever since been focused to do so. It has also participated in the global efforts of addressing the same, for example through observing the Kyoto Protocol and playing a significant role in International Corporation (Ding et al., 2007). Following this, the paper will discuss climate change problem in China and the various economic concerns and policies that can be used to address it. Economic Issues of Climate Change Some of the potential effects of climate change include the rise in sea levels, enhanced average temperatures, and the changing patterns of precipitation among others. These biophysical changes that are associated with climate change impact the human welfare detrimentally (Fu et al., 2008). Climate change in China is evidently associated with slow economic growth which contradicts the goal of China which is to enhance their economic development. This is going to happen following the increase in the relative temperature which would then minimize the average GDP by a significant gap (Fu et al., 2008). As it has been discussed above, one of the sectors that are significantly affected by climate change in China is agriculture. With the spreading results of climate change, the agricultural productivity is low mainly following the fact that crops need a given temperature for them to grow. Crop productivity is increasingly being impacted by the increase in temperature which has resulted in damaging crops and the introduction of new crop varieties that are tolerant to some of these effects of climate change (Fu et al., 2008). Lack of adequate agricultural productivity is linked to increased risks of food insecurity which will, in turn, lead to low human welfare and productivity. Little human productivity means low economic productivity which is what becomes detrimental to China. Without productive human resources and increased human population evidently, jeopardizes the economic prosperity of the country. China is the largest investor in infrastructure in the world, and they have a lot that is put in jeopardy regarding climate change. The country is experiencing rapid urbanization which then means that they continue to be increasingly vulnerable to some of the natural disasters like drought and floods that China is prone to historically. Studies have even highlighted some of the areas in China that are most prone to the economic impacts of climate change; for example Beijing, Shanghai, Jiangsu, Tianjin, and Zhejiang (Stern, 2007). These areas have been reported to be vulnerable to the climate change impacts because there is a high concentration of assets like water treatment centers, transport systems, as well as power plants. These areas are most susceptible to breakdown of such services as a result of the natural disasters which are accelerated by climate change (Stern, 2007). This would, therefore, mean that there would be more instances of transport delays, power failures, as well as interrupted water supply. The prices of water, gas, and electricity would go up which would then jeopardize the economic abilities of the people in China (Stern, 2007). Additionally, as the government of China continues to face the challenge of managing its rising population, the enhanced demand for water to support the country’s economic activity, as well as that of its people, is evidently posing additional burden to it. Thus, instead of focusing on the ways of enhancing their economic growth, these are some of the issues that take the central objective of the state. Regarding the companies that are so many in China, the effects of climate change especially the disasters that are associated with it could result in significant losses in production and the industrial accidents could be experienced in ways that had never been experienced before (Stern, 2006). For example, in the year 2011, flooding led to some of the manufacturing plants in Thailand like Honda and Toyota were forced to stop their production for several months which is something that China could experience as well (Stern, 2006). Such losses could result in ripple effects in the other countries that are associated with China as well as various other sectors as well. In turn, significant economic losses would be experienced if such major industries and companies shut down because of such disasters and will, in turn, slow down the economic development that China is trying to move towards achieving (Stern, 2006). The government of China is the one that is undergoing the greatest challenge when it comes to striving to sustain economic development in the face of this rapid impacts of climate change. As it has been documented above, the growth of infrastructure has been the primary driver of China’s economic growth. For example, regarding capital accumulation, a significant part of it which is infrastructure investment has contributed to about 70% of China’s growth since the year 1952 (Fu et al., 2008). However, the lack of adequate infrastructure which can withstand the natural disasters that are caused by the rapid impacts of climate change has significantly hindered the economic growth and development of China. It is evident that there is a market failure in China following the effects of climate change that they are undergoing. Climate change in itself is a good example of market failure and therefore would need a policy intervention to address it. One of the core causes of this market failure in China following the issue of climate change is the greenhouse gas externality (Stern, 2007). The emissions of the greenhouse gases are a side effect of the activities that China undertakes which are economically valuable to that country. Most of these effects of the greenhouse gas emissions are not experienced by the individuals who are undertaking the activities but by the future generations or the individuals who are living in other developing countries (Stern, 2007). Therefore, the effects of climate change and greenhouse gas emissions that are being experienced currently are as a result of the activities of those generations that existed before them. These detrimental impacts of the greenhouse gases are therefore considered to be external to the market (Stern, 2007). This means that it becomes an ethical as opposed to an economic incentive for the consumers and businesses to minimize their emissions. Following this, there is a market failure through the over-production of the greenhouse gases. Policy Options Various policy options may be utilized to address the issue of climate change in China some of the most efficient ones including the Carbon Tax, policy concerning the reduction of carbon dioxide intensity of generating power, road fuel taxes, as well as an excise tax on the generation of electricity. Carbon Tax This is a comprehensive tax policy in the utilization fossil fuel which results in the emission carbon dioxide which is a greenhouse gas. Therefore, this policy would promote an extensive range of opportunities to mitigate emissions which would entail switching to the utilization of cleaner fuels, conserving energy-consuming products, as well as improving on energy efficiencies across all the sectors of the Chinese economy (Nelson et al., 2010). This tax would raise significant revenue for the country and at the same time would reduce coal utilization, as well as reduce the number of deaths that result from the pollution of local air. This carbon tax policy is easy and straightforward to administer like through the integration of carbon charges into the excises of road fuel (Nelson et al., 2010). Therefore, this carbon tax would cut across various aspects and sectors of the Chinese economy regarding mitigating the various detrimental effects that China is facing following the rampant climate change issues. Policy of Excise on Generation of Electricity Various nations typically impose taxes on the consumption of electricity and mainly the residential electricity consumption for both fiscal and environmental reasons. However, the environmental efficiency of such policies is limited because they do not encourage the switching towards utilization of clean generation fuels (Wiener, 2007). Despite this, this policy would be effective because the electricity taxes would be matched to increasing prices of electricity under the aggressive and modest scenarios of a carbon tax of each period (Wiener, 2007). Policies on Vehicle Fuel Economy Following the steady population growth in China, it is expected to have so many vehicles on the road. Following this, in the year 2005, there was the regulation of new passenger vehicles in China (Wiener, 2007). The latest standards that have been set up by the United Nations is to standardize the fuel consumption of the new vehicles to being 5liters for every 100km. The implementation of this policy in China would result in the reduction of fuel consumption and emission of greenhouse gases and turn protect from experiencing the detrimental effects of climate change (Wiener, 2007). Recommended Policy Approach The most amicable economic policy that would be viable to China’s situation regarding climate change is the Carbon Tax policy. Currently, China is the number one carbon dioxide emitter which has even surpassed the emission in the United States. Given that China has dedicated itself towards minimizing the greenhouse gases, the carbon tax would work for them amicably (Nelson et al., 2010). Firstly, there will be the reduction in the rates of air pollution and the deaths that are associated with it which are primarily as a result of the significant fuel combustion there (Grubb, 2004). Following the assessment of public health, carbon emission, as well as the fiscal effects of carbon taxation, China will evidently realize a significant decline in the usage of fossil fuels and the subsequent emission of greenhouse gases. Another aspect that makes carbon tax the best choice for China is that it is a straightforward policy. This is because it just entails imposing taxes on the fossil fuel products right from their entry point in the Chinese economy. This will include levying rates on natural gas, petroleum products, as well as coal following the number of tons of carbon dioxide that will be produced per every unit of fuel (Grubb, 2004). Through doing this, the Chinese government will be in a position to collect adequate tax right at the mine mouth of the coal or at the processing plants of coal. Although there exists a downside of this policy, it can easily be managed. The most complex problem would be to address the burden associated with the high prices of energy on some of the vulnerable groups (Grubb, 2004). Therefore, as China is a country that is continuing to transition towards a path of sustainable growth, the carbon tax is evidently a powerful policy when it comes to supporting the economic re-balancing and at the same time improve the environment (Babiker, 2005). It is clear that China is committed to introducing some countrywide Emissions Trading Systems (ETS) for their large industrial sources (Babiker, 2005). However, the carbon tax can still prove to paramount because it will cover emissions and fuels and it will also result in approximately twice the revenue and environmental impacts of the equivalently scaled ETS. Thus, there is no clear reason as to why the carbon tax cannot be introduced in China hand in hand with ETS because the most important thing is to establish a robust emission price to be able to reap the badly required fiscal and health benefits (Babiker, 2005). Implementing the carbon tax hand in hand with the ETS will realize these benefits while at the same time take a significant step forward towards addressing the environmental challenge that the country is facing. Research Gap Although there have been efforts of evaluating the future effects that implementing the carbon tax would have on the Chinese economy, the future remains to be inherently uncertain regarding the way the fuel demand would react to the changes in prices following imposing the carbon tax. Thus, more research needs to be undertaken to establish clear ways of predicting the utilization of fuel in the Chinese economic sector as well as address the uncertainties that exist regarding the future effects of the carbon tax implementation. Conclusion China is the greatest user of fossil fuels and greatest emitter of greenhouse gases; it has committed itself towards coming up with measures that will help them reduce these emissions to realize their intended economic development. Some of the economic issues that are associated with climate change in China include the decline in agricultural productivity, human welfare productivity, infrastructural risks among others. Climate change has posed detrimental risks to various economic sectors of the China which have been discussed in the report. Some of the policy options for China in addressing these effects include the carbon tax and policies on vehicle fuels and electricity consumption. The recommended policy approach is carbon tax policy. References Babiker, M. H. (2005). Climate change policy, market structure, and carbon leakage. Journal of international Economics, 65(2): 421-445. Ding, Y., Ren, G., Zhao, Z., Xu, Y., Luo, Y., Li, Q., & Zhang, J. (2007). Detection, causes and projection of climate change over China: an overview of recent progress. Advances in Atmospheric Sciences, 24(6): 954-971. Fu, C., Jiang, Z., Guan, Z., He, J., & Xu, Z. (2008). Impacts of Climate Change on Water Resources and Agriculture in China. In Regional Climate Studies of China (pp. 447-464). Springer Berlin Heidelberg. Grubb, M. (2004). Technology Innovation and Climate Change Policy: an overview of issues and options. Keio economic studies, 41(2): 103-110. Nelson, G. C., Rosegrant, M. W., Palazzo, A., Gray, I., Ingersoll, C., Robertson, R., ... & Msangi, S. (2010). Food security, farming, and climate change to 2050: Scenarios, results, policy options (Vol. 172). 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