Do green tax policies shape China's household consumption structure? A production-side perspective

This paper investigates whether green taxation can yield a household double dividend—greener consumption and higher household welfare—via production-side mechanisms. Using a sectorally disaggregated computable general equilibrium (CGE) model calibrated to China's 2020 Social Accounting Matrix, we distinguish between traditional and green products within each industry to capture production—consumption linkages. Results show that higher green taxes raise the relative prices of traditional goods, increasing the within-industry share of green products. Importantly, higher intermediate input costs prompt firms to substitute toward value-added components, boosting capital returns and lifting household incomes by RMB 40.88 billion despite a modest output decline. These relative-price and income channels jointly underpin the household double dividend, adding a micro-foundation to the broader literature on welfare gains. Sensitivity analyses—including elasticity draws, fiscal closures, labor market assumptions, and a three-period recursive dynamic extension—confirm robustness, indicating that even at current low levels, green taxation can reshape consumption structures and enhance welfare without destabilizing macroeconomic fundamentals. The findings highlight the importance of production–consumption linkages in environmental fiscal policy and suggest pairing tax escalation with targeted transfers and sectoral transition measures to safeguard equity and sustain the double-dividend effect.