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The Impacts of Environmental Tax in China: A Dynamic Recursive Multi-Sector CGE Model

Author

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  • Bowen Xiao

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Dongxiao Niu

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Xiaodan Guo

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

  • Xiaomin Xu

    (School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China)

Abstract

In recent years, the accumulated environmental problems resulting from excessive usage of fossil fuels have gradually loomed. Thus, an environmental tax, as an important policy tool, has been put on the agenda in China. In this paper, a dynamic recursive multi-sector Computable General Equilibrium (CGE) model is applied to explore the impacts of the environmental tax on China’s economy. To comprehensively analyze the impacts, we introduce four kinds of typical contaminants and set two kinds of scenarios: different tax rates and different tax refunds. The results show that the environmental tax is conducive to environmental improvement, but the economic variables are adversely affected, for example, the loss of GDP at the low level tax rate is 0.46%. In order to offset the negative impacts, we presume the government refunds the tax. The results show that this can indeed relieve the negative effects. When the government refunds the production tax and corporate income tax, 0.49% and 0.34% of GDP is relieved by respectively. This paper provides a comprehensive analysis of the implementation of the environmental tax in China and lays a solid foundation for the introduction of the environmental tax.

Suggested Citation

  • Bowen Xiao & Dongxiao Niu & Xiaodan Guo & Xiaomin Xu, 2015. "The Impacts of Environmental Tax in China: A Dynamic Recursive Multi-Sector CGE Model," Energies, MDPI, vol. 8(8), pages 1-28, July.
    • Handle: RePEc:gam:jeners:v:8:y:2015:i:8:p:7777-7804:d:53401
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    References listed on IDEAS

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    Cited by:

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    6. Babatunde, Kazeem Alasinrin & Begum, Rawshan Ara & Said, Fathin Faizah, 2017. "Application of computable general equilibrium (CGE) to climate change mitigation policy: A systematic review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 61-71.
    7. Xiao, Bowen & Fan, Ying & Guo, Xiaodan, 2018. "Exploring the macroeconomic fluctuations under different environmental policies in China: A DSGE approach," Energy Economics, Elsevier, vol. 76(C), pages 439-456.
    8. Yinger Zheng & Haixia Zheng & Xinyue Ye, 2016. "Using Machine Learning in Environmental Tax Reform Assessment for Sustainable Development: A Case Study of Hubei Province, China," Sustainability, MDPI, vol. 8(11), pages 1-20, November.
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    10. Sun, Yuanyuan & Mao, Xianqiang & Liu, Gengyuan & Yin, Xinan & Zhao, Yanwei, 2020. "Modelling the effects of energy taxes on ecological footprint transfers in China's foreign trade," Ecological Modelling, Elsevier, vol. 431(C).
    11. Dong, Baomin & Ma, Xili & Wang, Ningjing & Wei, Weixian, 2020. "Impacts of exchange rate volatility and international oil price shock on China's regional economy: A dynamic CGE analysis," Energy Economics, Elsevier, vol. 86(C).
    12. Cheng Peng & Lu Zhao & Liwen Liu & Jia Chen, 2023. "The Influence of Environmental Protection Tax Law on Urban Land Green Use Efficiency in China: The Nonlinear Moderating Effect of Tax Rate Increase," Sustainability, MDPI, vol. 15(16), pages 1-18, August.
    13. Kyungwon Park & Taeyeon Yoon & Changsub Shim & Eunjin Kang & Yongsuk Hong & Yoon Lee, 2020. "Beyond Strict Regulations to Achieve Environmental and Economic Health—An Optimal PM 2.5 Mitigation Policy for Korea," IJERPH, MDPI, vol. 17(16), pages 1-16, August.
    14. Li, Wei & Jia, Zhijie & Zhang, Hongzhi, 2017. "The impact of electric vehicles and CCS in the context of emission trading scheme in China: A CGE-based analysis," Energy, Elsevier, vol. 119(C), pages 800-816.
    15. Inha Oh & Wang-Jin Yoo & Yiseon Yoo, 2019. "Impact and Interactions of Policies for Mitigation of Air Pollutants and Greenhouse Gas Emissions in Korea," IJERPH, MDPI, vol. 16(7), pages 1-17, March.
    16. Wen-Jun Tu & Xiao-Guang Yue & Wei Liu & M. James C. Crabbe, 2020. "Valuation Impacts of Environmental Protection Taxes and Regulatory Costs in Heavy-Polluting Industries," IJERPH, MDPI, vol. 17(6), pages 1-21, March.
    17. Zhang, Jinzhu & Liu, Yu & Zhou, Meifang & Chen, Boyang & Liu, Yawen & Cheng, Baodong & Xue, Jinjun & Zhang, Wei, 2022. "Regulatory effect of improving environmental information disclosure under environmental tax in China: From the perspectives of temporal and industrial heterogeneity," Energy Policy, Elsevier, vol. 164(C).
    18. Wei Li & Zhijie Jia, 2017. "Carbon tax, emission trading, or the mixed policy: which is the most effective strategy for climate change mitigation in China?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(6), pages 973-992, August.

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