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The economic effects of carbon tax on China’s provinces

Author

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  • Zhang, Kun
  • Xue, Mei-Mei
  • Feng, Kuishuang
  • Liang, Qiao-Mei

Abstract

The responsibility for carbon emissions tends to be different under different emission accounting principles. By applying the latest 2012 Chinese multi-regional input–output table, this study evaluated the impacts of carbon tax on tax burdens and sectoral competitiveness in Chinese provinces when considering either production-based or consumption-based emissions. Our results indicated that, in the scenario of cutting production tax for carbon tax, the developed provinces, such as Beijing, Shanghai, Zhejiang, and Jiangsu, who are much bigger payers of production tax, are net beneficiaries of carbon tax. In contrast, recycling the tax revenues to low-income households makes the less-developed provinces in the central and western China become net revenue receivers. Furthermore, for competitiveness effects, the emission intensive sectors, such as Electricity and hot water production and supply, Petroleum and gas, and Metal products, are impacted vitally under both accounting principles in all provinces. Nevertheless, compared with the production-based principle, a consumption-based carbon tax could reduce the unfavorable competitiveness effects of most affected sectors in the less-developed provinces, while slightly increasing those effects in the developed provinces. Our results provide new information on the regional impacts of carbon tax based two different accounting principles with different tax revenue recycling scenarios.

Suggested Citation

  • Zhang, Kun & Xue, Mei-Mei & Feng, Kuishuang & Liang, Qiao-Mei, 2019. "The economic effects of carbon tax on China’s provinces," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 784-802.
  • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:4:p:784-802
    DOI: 10.1016/j.jpolmod.2019.02.014
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    References listed on IDEAS

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    More about this item

    Keywords

    Carbon emissions; Accounting principles; Multi-regional input–output analysis; China;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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