Professor CAO Jing of Tsinghua SEM has been named the recipient of the third annual McKinsey China Economics Award for her paper on the issues surrounding design of a carbon tax policy for China.

The award was presented by the McKinsey China Council of Business Economists (MCCBE) at an event held at Tsinghua University. MCCBE is a non-profit organization comprised of prominent economists whose mission is to advance the dialogue on issues concerning the Chinese economy. The award recognizes young Chinese economists under the age of 40 who have published a paper that expands the understanding of issues in the field of economics in China. The winning paper was among 20 submitted for consideration.

Submissions are recommended by an evaluation committee comprised of peers from leading academic institutions in China, as well as members of MCCBE. The evaluation committee evaluates submissions based on a range of criteria, including methodological rigor, practical applicability of key findings, and innovativeness of approach. Above all, the paper should serve to advance understanding of key economic issues facing China today. Half of the cash award of 100,000 RMB is donated to a charitable organization selected by the winner.

The winning paper, entitled “Towards a Low-Carbon Economy: The Design of a Carbon Tax Policy for China And an Analysis of the CGE Model,” was originally published in the December 2009 issue of theJournal of Financial Research, an academic journal headquartered in Beijing. From her comparison of quantity-based cap-and-trade and price-based carbon tax policies, Professor CAO asserts that a carbon tax would be a more appropriate policy solution for China than cap-and-trade in the near term. The paper discusses several design factors that would go into a comprehensive carbon tax reform policy in China, including how to determine the carbon tax base, how to set tax rates, how to adjust the tax dynamically to account for inflation, and subsidies that may be required to mitigate the economic impact of such a tax on businesses and consumers.

Presenting the award, Jonathan Woetzel, Director in McKinsey & Company’s Shanghai office and co-founder of MCCBE, said: “Of the several outstanding submissions we received, the judges recognized this paper for its rigorous analytical methodology, its creative problem-solving approach, and for the insight it sheds on an issue of great significance to the policy debate on China’s approach to tackling greenhouse gas emissions in an economically and environmentally sustainable way.”

About MCCBE

The McKinsey China Council of Business Economists (MCCBE) is a network of some of China’s top economists and McKinsey partners who are committed to advancing the dialogue on important business economics issues in China. The network currently comprises about 30 members from China's top universities and a few private sector economists and senior government officials. Members share their ongoing research with a view to developing a deeper understanding of the dynamics underpinning China's macro economy. MCCBE also draws upon the extensive research resources of the McKinsey Global Institute, the economics research arm of McKinsey. MCCBE is the sponsor of the McKinsey China Economics Award, which recognizes the contributions of young Chinese economists to the field of business economics.