Adjusting export tax rebates to reduce the environmental impacts of trade: Lessons from China.

Export tax rebates are an important policy instrument for stimulating exports, which many developing countries make use of. However, excessive export tax rebates and inappropriate structural arrangements can lead to over-production in highly polluting industries and cause the environment to deteriorate. This paper, taking China as the study case, tests and verifies the statistical significance of the causal relationship between export tax rebates and pollution emissions. With a computable general equilibrium modeling, the current study further analyzes the effectiveness of export tax rebate adjustments aimed at alleviating environmental pressure for different time periods. It is found that before 2003, export tax rebates primarily promoted exports and boosted foreign exchange reserves, and highly polluting sectors enjoyed above-average export tax rebates, which led to increased pollution emissions. Between 2003 and 2010, the export tax rebate system was reformed to reduce support for the highly polluting export sectors, which led to decreases in emissions. Canceling export tax rebates for highly polluting sectors is shown to be the most favorable policy choice for improving the environmental performance of China's international trade. This study can serve as reference for other developing countries which similarly rely on export tax rebates, so that they can adjust their policies so as to combine economic growth with pollution control.

How well have China's recent five-year plans been implemented for energy conservation and air pollution control?

This study evaluates how well China's 11th and 12th Five-Year Plans have been implemented in terms of energy conservation and air pollution control and deconstructs the effects of the economic, energy, and environmental policies included in the Plans. A "counterfactual" comparative-scenario method is deployed, which assumes a business as usual scenario in which the changes in economic, energy, and environmental parameters are "frozen", and then reactivates them one by one, with the help of LEAP modeling. It is found that during the 11th Five-Year Plan period, the binding targets were basically achieved. Economic growth put a great strain upon the energy demand and the environment, but energy policy made a decisive contribution by promoting energy efficiency and structure. Environmental policy promoted the deployment of end-of-pipe treatment which led to the control of certain air pollutants but at the expense of an increase in energy use and in the emission of other pollutants. During the ongoing 12th Five-Year Plan period, energy policy's potential for efficiency improvement is shrinking, but economic policy is restraining economic growth thus making a positive contribution. Environmental policy attempts to enforce multipollutant reduction, but there is still insufficient focus on the cocontrol of different pollutants and CO2.