Spatial economic linkages of economic growth and air pollution: developing an air pollution-multinational CGE model of China, Japan, and Korea

This paper analyzes spatial influences of national economic growth on trade and the emission of PM2.5 for three Northeast Asia countries—China, Japan, and Korea. An Air pollution-Multinational Computable General Equilibrium model is developed to integrate two environmental modules for PM2.5 emissions and premature mortality with a multinational economic model. Emission flows of PM2.5 are examined in terms of production-based emissions by the producer in the supply process and consumption-based emissions by the consumer in the demand process. The paper shows that capital stock accumulation in China has positive effects on increases in total trades as well as production-based and consumption-based emissions of PM2.5 among three countries. In contrast with these impacts, the supply growth of Japan and Korea through the capital accumulation could reduce total amounts of emissions of PM2.5 pollutants in the area because of increasing their outputs with low-emission technologies and substituting for Chinese imports. However, their increases for imports would cause premature deaths in China to rise, so two countries need to share economic costs for mitigating the emission of the PM2.5 in China.