Unraveling economic and environmental implications of cutting overcapacity of industries: A city-level empirical simulation with input-output approach

On a way towards transition to greener and more intensive development patterns, many Chinese cities are ambitiously prompting cutting overcapacity as a primary task of supply-side reform. However, the impacts of cutting overcapacity of industries on economic development and environmental quality still remain unrevealed clearly. In this study, a dynamic input-output simulation model is developed by integrating supply and demand balances of material and value with industrial capacity and applied to Tangshan City, which is typically implementing cutting overcapacity against four key sectors (oil processing and coking, cement, iron and steel, and power and heat). Three scenarios are set for analyzing changes in capacity and pollutant (SO2, NOx and particulate matter) emission mitigation during 2017-2025 through mutual comparisons. Changes in capacity of four key sectors as well as gross regional product are simulated. Industrial structure will be reshaped with most notable changes in service industry and iron and steel industry. Critical industrial chains are traced for manifesting to what extent cutting overcapacity will influence the sectors closely interacted with the key sectors. Remarkable mitigation of emissions and concentration contribution can be contributed by cutting overcapacity with accumulative mitigated emissions of the pollutants as 0.48, 1.09 and 0.79 Mt, respectively. As a first attempt on combining input-output analysis with research on industrial capacity and on investigating environmental impacts of cutting overcapacity, this study is expected to provide reference to pertinent policy-making with regard to sound capacity regulation of industries. (C) 2019 Elsevier Ltd. All rights reserved.