IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v159y2018icp558-568.html
   My bibliography  Save this article

The energy, environmental and economic impacts of carbon tax rate and taxation industry: A CGE based study in China

Author

Listed:
  • Lin, Boqiang
  • Jia, Zhijie

Abstract

Human activities have led to increase in carbon dioxide emissions, and carbon tax is one of the main policy tools for reducing global emissions. This paper constructs nine scenarios considering different carbon tax rates and the different taxable industries to analyze the impact of Carbon Tax System (CTS) on energy, environment and the economy. We find that the negative impact of CTS on GDP is acceptable, and the maximum scenario will not exceed 0.5%. If carbon taxes are levied on energy-intensive enterprises, the impact on carbon emissions is also relatively small, even if the carbon tax rate is relatively high. Higher carbon tax rate will result in higher CO2 emission reduction and higher marginal CO2 emission reduction of CTS. The carbon tax rate follows the "law of increasing marginal emission reduction". We also argue that the focus of taxation should be on energy enterprises. It is only in this way that the efficiency of the energy market can be fully implemented to conserve energy and reduce emissions. This paper suggests that China should adopt CTS that simultaneously imposes a higher tax on energy companies and energy-intensive enterprises. This will maximize emissions reductions and have only a small impact on GDP.

Suggested Citation

  • Lin, Boqiang & Jia, Zhijie, 2018. "The energy, environmental and economic impacts of carbon tax rate and taxation industry: A CGE based study in China," Energy, Elsevier, vol. 159(C), pages 558-568.
    • Handle: RePEc:eee:energy:v:159:y:2018:i:c:p:558-568
    DOI: 10.1016/j.energy.2018.06.167
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544218312325
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2018.06.167?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hosoe, Nobuhiro, 2014. "Estimation errors in input–output tables and prediction errors in computable general equilibrium analysis," Economic Modelling, Elsevier, vol. 42(C), pages 277-286.
    2. Ghaith, Ahmad F. & Epplin, Francis M., 2017. "Consequences of a carbon tax on household electricity use and cost, carbon emissions, and economics of household solar and wind," Energy Economics, Elsevier, vol. 67(C), pages 159-168.
    3. Jiang, Zhujun & Shao, Shuai, 2014. "Distributional effects of a carbon tax on Chinese households: A case of Shanghai," Energy Policy, Elsevier, vol. 73(C), pages 269-277.
    4. Runar Brannlund & Lars Persson, 2012. "To tax, or not to tax: preferences for climate policy attributes," Climate Policy, Taylor & Francis Journals, vol. 12(6), pages 704-721, November.
    5. Chen, Zi-yue & Nie, Pu-yan, 2016. "Effects of carbon tax on social welfare: A case study of China," Applied Energy, Elsevier, vol. 183(C), pages 1607-1615.
    6. Paroussos, Leonidas & Fragkos, Panagiotis & Capros, Pantelis & Fragkiadakis, Kostas, 2015. "Assessment of carbon leakage through the industry channel: The EU perspective," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 204-219.
    7. Rosas-Flores, Jorge Alberto & Bakhat, Mohcine & Rosas-Flores, Dionicio & Fernández Zayas, José Luis, 2017. "Distributional effects of subsidy removal and implementation of carbon taxes in Mexican households," Energy Economics, Elsevier, vol. 61(C), pages 21-28.
    8. Lu, Yingying & Liu, Yu & Zhou, Meifang, 2017. "Rebound effect of improved energy efficiency for different energy types: A general equilibrium analysis for China," Energy Economics, Elsevier, vol. 62(C), pages 248-256.
    9. Max Franks & Ottmar Edenhofer & Kai Lessmann, 2017. "Why Finance Ministers Favor Carbon Taxes, Even If They Do Not Take Climate Change into Account," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 445-472, November.
    10. Sam Meng & Mahinda Siriwardana & Judith McNeill, 2013. "The Environmental and Economic Impact of the Carbon Tax in Australia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(3), pages 313-332, March.
    11. Grischa Perino & Thomas Pioch, 2017. "Banning incandescent light bulbs in the shadow of the EU Emissions Trading Scheme," Climate Policy, Taylor & Francis Journals, vol. 17(5), pages 678-686, July.
    12. Peter Heindl, 2017. "The impact of administrative transaction costs in the EU emissions trading system," Climate Policy, Taylor & Francis Journals, vol. 17(3), pages 314-329, April.
    13. Böhringer, Christoph & Garcia-Muros, Xaquin & Cazcarro, Ignacio & Arto, Iñaki, 2017. "The efficiency cost of protective measures in climate policy," Energy Policy, Elsevier, vol. 104(C), pages 446-454.
    14. Lin, Boqiang & Li, Aijun, 2012. "Impacts of removing fossil fuel subsidies on China: How large and how to mitigate?," Energy, Elsevier, vol. 44(1), pages 741-749.
    15. John Barrett & Glen Peters & Thomas Wiedmann & Kate Scott & Manfred Lenzen & Katy Roelich & Corinne Le Qu�r�, 2013. "Consumption-based GHG emission accounting: a UK case study," Climate Policy, Taylor & Francis Journals, vol. 13(4), pages 451-470, July.
    16. Michael Hopkin, 2004. "The carbon game," Nature, Nature, vol. 432(7015), pages 268-270, November.
    17. Lin, Boqiang & Chen, Yufang & Zhang, Guoliang, 2017. "Technological progress and rebound effect in China's nonferrous metals industry: An empirical study," Energy Policy, Elsevier, vol. 109(C), pages 520-529.
    18. Sun, Chuanwang & Yuan, Xiang & Yao, Xin, 2016. "Social acceptance towards the air pollution in China: Evidence from public's willingness to pay for smog mitigation," Energy Policy, Elsevier, vol. 92(C), pages 313-324.
    19. Lin, Boqiang & Jia, Zhijie, 2018. "Impact of quota decline scheme of emission trading in China: A dynamic recursive CGE model," Energy, Elsevier, vol. 149(C), pages 190-203.
    20. G. Cornelis van Kooten & Clark S. Binkley & Gregg Delcourt, 1995. "Effect of Carbon Taxes and Subsidies on Optimal Forest Rotation Age and Supply of Carbon Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 365-374.
    21. Lin, Boqiang & Jia, Zhijie, 2017. "The impact of Emission Trading Scheme (ETS) and the choice of coverage industry in ETS: A case study in China," Applied Energy, Elsevier, vol. 205(C), pages 1512-1527.
    22. Chaabane, A. & Ramudhin, A. & Paquet, M., 2012. "Design of sustainable supply chains under the emission trading scheme," International Journal of Production Economics, Elsevier, vol. 135(1), pages 37-49.
    23. Reyer Gerlagh & Snorre Kverndokk & Knut Rosendahl, 2009. "Optimal Timing of Climate Change Policy: Interaction Between Carbon Taxes and Innovation Externalities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 369-390, July.
    24. Miriam Frey, 2017. "Assessing the impact of a carbon tax in Ukraine," Climate Policy, Taylor & Francis Journals, vol. 17(3), pages 378-396, April.
    25. Brännlund, Runar & Persson, Lars, 2010. "Tax or no tax? Preferences for climate policy attributes," Umeå Economic Studies 802, Umeå University, Department of Economics.
    26. Sun, Chuanwang & Ding, Dan & Yang, Mian, 2017. "Estimating the complete CO2 emissions and the carbon intensity in India: From the carbon transfer perspective," Energy Policy, Elsevier, vol. 109(C), pages 418-427.
    27. 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.
    28. Wang, Zhaohua & Danish, & Zhang, Bin & Wang, Bo, 2018. "The moderating role of corruption between economic growth and CO2 emissions: Evidence from BRICS economies," Energy, Elsevier, vol. 148(C), pages 506-513.
    29. Adam G. Bumpus, 2015. "Firm responses to a carbon price: corporate decision making under British Columbia's carbon tax," Climate Policy, Taylor & Francis Journals, vol. 15(4), pages 475-493, July.
    30. Insley, Margaret, 2017. "Resource extraction with a carbon tax and regime switching prices: Exercising your options," Energy Economics, Elsevier, vol. 67(C), pages 1-16.
    31. Sun, Chuanwang & Ouyang, Xiaoling, 2016. "Price and expenditure elasticities of residential energy demand during urbanization: An empirical analysis based on the household-level survey data in China," Energy Policy, Elsevier, vol. 88(C), pages 56-63.
    32. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
    33. Liu, Yu & Lu, Yingying, 2015. "The Economic impact of different carbon tax revenue recycling schemes in China: A model-based scenario analysis," Applied Energy, Elsevier, vol. 141(C), pages 96-105.
    34. Chen, Zi-yue & Huang, Zhen-hai & Nie, Pu-yan, 2018. "Industrial characteristics and consumption efficiency from a nexus perspective – Based on Anhui’s Empirical Statistics," Energy Policy, Elsevier, vol. 115(C), pages 281-290.
    35. He, Yongda & Lin, Boqiang, 2017. "The impact of natural gas price control in China: A computable general equilibrium approach," Energy Policy, Elsevier, vol. 107(C), pages 524-531.
    36. McPherson, Madeleine & Tahseen, Samiha, 2018. "Deploying storage assets to facilitate variable renewable energy integration: The impacts of grid flexibility, renewable penetration, and market structure," Energy, Elsevier, vol. 145(C), pages 856-870.
    37. Dong, Huijuan & Dai, Hancheng & Geng, Yong & Fujita, Tsuyoshi & Liu, Zhe & Xie, Yang & Wu, Rui & Fujii, Minoru & Masui, Toshihiko & Tang, Liang, 2017. "Exploring impact of carbon tax on China’s CO2 reductions and provincial disparities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 596-603.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lin, Boqiang & Jia, Zhijie, 2019. "What will China's carbon emission trading market affect with only electricity sector involvement? A CGE based study," Energy Economics, Elsevier, vol. 78(C), pages 301-311.
    2. Lin, Boqiang & Jia, Zhijie, 2019. "Impacts of carbon price level in carbon emission trading market," Applied Energy, Elsevier, vol. 239(C), pages 157-170.
    3. Aiwen Zhao & Xiaoqian Song & Jiajie Li & Qingchun Yuan & Yingshun Pei & Ruilin Li & Michael Hitch, 2023. "Effects of Carbon Tax on Urban Carbon Emission Reduction: Evidence in China Environmental Governance," IJERPH, MDPI, vol. 20(3), pages 1-19, January.
    4. Lin, Boqiang & Jia, Zhijie, 2019. "How does tax system on energy industries affect energy demand, CO2 emissions, and economy in China?," Energy Economics, Elsevier, vol. 84(C).
    5. Hu, Haisheng & Dong, Wanhao & Zhou, Qian, 2021. "A comparative study on the environmental and economic effects of a resource tax and carbon tax in China: Analysis based on the computable general equilibrium model," Energy Policy, Elsevier, vol. 156(C).
    6. Lin, Boqiang & Jia, Zhijie, 2020. "Does the different sectoral coverage matter? An analysis of China's carbon trading market," Energy Policy, Elsevier, vol. 137(C).
    7. Freyre, Alisa & Klinke, Sandra & Patel, Martin K., 2020. "Carbon tax and energy programs for buildings: Rivals or allies?," Energy Policy, Elsevier, vol. 139(C).
    8. Liu, Lirong & Huang, Charley Z. & Huang, Guohe & Baetz, Brian & Pittendrigh, Scott M., 2018. "How a carbon tax will affect an emission-intensive economy: A case study of the Province of Saskatchewan, Canada," Energy, Elsevier, vol. 159(C), pages 817-826.
    9. Jia, Zhijie & Lin, Boqiang, 2020. "Rethinking the choice of carbon tax and carbon trading in China," Technological Forecasting and Social Change, Elsevier, vol. 159(C).
    10. Jia, Zhijie & Lin, Boqiang & Liu, Xiying, 2023. "Rethinking the equity and efficiency of carbon tax: A novel perspective," Applied Energy, Elsevier, vol. 346(C).
    11. Zhang, Lirong & Li, Yakun & Jia, Zhijie, 2018. "Impact of carbon allowance allocation on power industry in China’s carbon trading market: Computable general equilibrium based analysis," Applied Energy, Elsevier, vol. 229(C), pages 814-827.
    12. Niu, Tong & Yao, Xilong & Shao, Shuai & Li, Ding & Wang, Wenxi, 2018. "Environmental tax shocks and carbon emissions: An estimated DSGE model," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 9-17.
    13. Karmaker, Shamal Chandra & Hosan, Shahadat & Chapman, Andrew J. & Saha, Bidyut Baran, 2021. "The role of environmental taxes on technological innovation," Energy, Elsevier, vol. 232(C).
    14. Weijiang Liu & Yangyang Li & Tingting Liu & Min Liu & Hai Wei, 2021. "How to Promote Low-Carbon Economic Development? A Comprehensive Assessment of Carbon Tax Policy in China," IJERPH, MDPI, vol. 18(20), pages 1-16, October.
    15. Hammerle, Mara & Best, Rohan & Crosby, Paul, 2021. "Public acceptance of carbon taxes in Australia," Energy Economics, Elsevier, vol. 101(C).
    16. Wang, Xu & Zhu, Lei & Fan, Ying, 2018. "Transaction costs, market structure and efficient coverage of emissions trading scheme: A microlevel study from the pilots in China," Applied Energy, Elsevier, vol. 220(C), pages 657-671.
    17. Lin, Boqiang & Jia, Zhijie, 2018. "Impact of quota decline scheme of emission trading in China: A dynamic recursive CGE model," Energy, Elsevier, vol. 149(C), pages 190-203.
    18. Lin, Boqiang & Chen, Yufang, 2019. "Dynamic linkages and spillover effects between CET market, coal market and stock market of new energy companies: A case of Beijing CET market in China," Energy, Elsevier, vol. 172(C), pages 1198-1210.
    19. Xiao Yu & Yingdong Xu & Meng Sun & Yanzhe Zhang, 2021. "The Green-Innovation-Inducing Effect of a Unit Progressive Carbon Tax," Sustainability, MDPI, vol. 13(21), pages 1-18, October.
    20. Li, Xiaoyu & Yao, Xilong, 2020. "Can energy supply-side and demand-side policies for energy saving and emission reduction be synergistic?--- A simulated study on China's coal capacity cut and carbon tax," Energy Policy, Elsevier, vol. 138(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:159:y:2018:i:c:p:558-568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.