With its huge population and rapid economic growth in recent years, China raises special concern about its impact on global warming. This concern is further heightened by the fact that China is a very inefficient, as well as being the largest, user of coal. Its emission of grams of carbon per dollar of GNP is many times that for any country, though per capita emission still remains very small compared to those in developed economies (Whalley and Wigle, 1991). Clarke and Winters' chapter 8 is the first systematic attempt to deal with the important policy issue of how China might lower its air pollution. Although ‘sustainable development’ appears in the chapter's title, the analytical framework of the chapter is static, focused on the impact of one-shot fuel price rationalisation and carbon taxation. The chapter has three main messages:

1. The cost of CO2 abatement in China appears to be low and possibly negative if secondary benefits of abatement are taken into account.

2. The removal of distortion in energy prices seems to yield relatively small benefits.

3. Carbon taxation has substantial benefits and should be the central component of environmental and energy policy in China.

These conclusions, as Clarke and Winters emphasise, are based on slender and uncertain evidence. The conclusion that a carbon tax would be the central component of environmental policy is perhaps not surprising given that reducing carbon emission is taken to be the policy aim and price rationalisation and a carbon tax are the only policy instruments that are considered.