Effects of investment growth in energy sectors of western areas on local economy and emissions: Case of Shaanxi Province of China based on a CGE model

Abstract

Purpose

The purpose of this paper is to analyze the effects of investment growth in energy sectors of western areas of China on the local economy and emission of carbon dioxide (CO₂).

Design/methodology/approach

The paper is based on a two‐region, ten‐sector recursive dynamic computable general equilibrium model which is based on the input‐output table of Shaanxi Province for 2002.

Findings

Three different scenarios are considered in a static analysis where the investment in the energy sector of western areas is increased at the rate of 20, 40 and 60 per cent. The changes of some macro‐economic variables are simulated under these scenarios. The long‐term effects on GDP and emission of CO₂ in different scenarios are also simulated. The results show that the GDP growth is 0‐8.92 per cent, households disposable income growth is 0‐8.94 per cent, and emission of CO₂ growth is 0‐11.10 per cent when the investment grows between 0 and 60 per cent. The oil and gas sector is the most effective sector whose growth rate is 0‐19.47 per cent. The effects of investment growth in base period are relatively big but weaken gradually over time in the long‐run.

Originality/value

The paper is of value in highlighting the importance (for policy makers) of considering the development and application of low‐emission technologies to prevent further environmental degradation.

Citation

Lu, C. (2009), "Effects of investment growth in energy sectors of western areas on local economy and emissions: Case of Shaanxi Province of China based on a CGE model", International Journal of Energy Sector Management, Vol. 3 No. 1, pp. 29-49. https://doi.org/10.1108/17506220910947836