CJO - Abstract - Equilibrium pollution and economic development in China

Environment and Development Economics (2003), 8 : 451-466 Cambridge University Press

Copyright © 2003 Cambridge University Press

doi:10.1017/S1355770X030024X

Published online by Cambridge University Press 25 Jun 2003

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Environment and Development Economics (2003), 8:3:451-466 Cambridge University Press
Copyright © 2003 Cambridge University Press
doi:10.1017/S1355770X030024X

Theory and Applications

Equilibrium pollution and economic development in China

Hua Wang ^a1 and David Wheeler ^a1
^a1 Development Research Group, World Bank, 1818 H St. N.W., Washington, DC 20433 USA. Email: HWANG1@worldbank.org.

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Abstract

This paper develops and estimates a structural equilibrium pollution model, in which the price and quantity of industrial pollution are jointly determined by the intersection of environmental demand and supply functions. The industrial environmental demand function relates industrial pollution intensity to the local price of pollution, while controlling for characteristics such as sector, scale, and ownership. The local environmental supply function specifies the pollution price imposed by the host community as pollution rises. The model provides a good fit to available data on provincial variations in China's pollution levy, or industrial emissions charge. Our results also suggest that Chinese industry has reduced emissions significantly in response to the levy.