This article investigates the relationship between China's coal consumption in power sector and sustainable GDP per capita. By subtracting the environmental and social cost from the GDP, the overall effect of power-generating coal use on the country's economic growth is re-examined using time series data from 1961 to 2010. Statistical analysis shows that the role of coal consumption in boosting the Chinese economy is diminishing when major negative externalities are taken into consideration. Given the country's heavy reliance on coal in the short term, improved tax design in power generation industry is seen as a possible solution to reduce its environmental liabilities. Potential taxation policies to incentivize the retrofitting of existing coal-fired plant are analyzed and evaluated.
Xue Ting Wang, National University of Singapore, Singapore
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