Macro and Structural Effects of Carbon Tax in China Based on the ECGE Model

Abstract

Rapid economic development has brought great pressure to China. Carbon tax could be an ideal economic tool to cope with the environmental pressure. The implementation of carbon tax will exert an influence on the national and sectoral economies as well as reduction. However, few researchers have focused on the carbon tax effect at the sectoral level. Based on SAM 2012, this study develops an ECGE model consisting of the environment module. Then the macro and structural effects of carbon tax are simulated at tax rates of 10-100 yuan/t CO 2 in China. Simulation results show that compared with the baseline: 1) Carbon tax has a mild strike on the GDP of China and is effective at reducing emissions. Furthermore, we found that a carbon tax rate of 70 yuan/t CO 2 may be an appropriate rate to achieve the Chinese reduction target of carbon intensity in the year 2020. 2) Carbon tax induces an output shrinkage in energy or high-energy-consuming industries by 0.95-7.65%, while there is a slight increase in low-energy-consuming industries. The mining and washing of coal industry (coal) experiences the largest decrease in CO 2 emissions and the light industry (lindus) experiences the sharpest decline in carbon intensity.

Simulating the environmental and economic effects of a carbon tax in Vietnam: a static computable general equilibrium analysis

“…These results are similar to previous studies (e.g. Zhou et al, 2022;Meng et al, 2013;Cao et al, 2021;Wu et al, 2019;Li and Su, 2017)…”

“…In China, Cao et al (2021) compared carbon emission reduction due to the carbon tax among models and found that carbon emission mitigation was shown in all cases. Wu et al (2019) analyze the effects of carbon taxes ranging from 10 to 100 yuan/tCO 2 (around $1.6 to $15.7/tCO 2 ) imposed on the use of fossil energy in China by employing a CGE model and found that a carbon tax rate of 70 yuan/tCO 2 (around $11/tCO 2 ) could lead to the Chinese reduction target achievement in 2020.…”

“…Regarding the adverse economic impacts of the carbon tax, the low carbon tax rate shows a modest negative effect on GDP, higher carbon tax causes more loss in GDP (e.g. Zhou et al, 2022;Meng et al, 2013;Cao et al, 2021;Wu et al, 2019;Li and Su, 2017). With carbon tax rates of 5-84-284 yuan/tCO 2 in 2020, 2030 and 2050, respectively, GDP would decrease about 0.2%-0.8% in 2050, and with the double tax rate, GDP loss would be 0.5%-1.8% (Cao et al, 2021).…”

“…would decline by less than 1%. A strong decline (0.12-1.12%) in welfare due to carbon tax was found by Wu et al (2019). In previous studies, revenue recycling policies also have been considered to limit the negative effects of the carbon tax on economic development and welfare.…”

“…While some countries adopted a fairly high carbon tax such as Switzerland (US$87/tCO 2e ), and Sweden (US$132/tCO 2e ), others have a fairly low carbon level such as Chile, India, Japan and Portugal (a tax rate equivalent of around US$3 and US$6 per tCO 2e ) (World Bank, 2017). Some previous studies focus on looking at the possible impacts of different carbon prices such as Wissema and Dellink (2007) who examined the carbon energy tax of V10-15/t CO 2 in Ireland; Antosiewicz et al (2022) simulate impacts of carbon prices ranging from EUR 29.4 to 84.6/tCO 2 in Poland; Wu et al (2019) analyze the effects of carbon taxes ranging from 10 to 100 yuan/tCO 2 (around $1.6 to $15.7/tCO 2 ) imposed on the use of fossil energy in China. However, some studies only look at a specific carbon price as proposed by the government such as Meng et al (2013) who focused on a carbon tax of AS$23/tCO 2 in Australia.…”