IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v19y2022i15p9257-d874646.html
   My bibliography  Save this article

Tax Policy and Total Factor Carbon Emission Efficiency: Evidence from China’s VAT Reform

Author

Listed:
  • Da Gao

    (School of Literature, Law and Economics, Wuhan University of Science and Technology, Wuhan 430070, China)

  • Xinlin Mo

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

  • Ruochan Xiong

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

  • Zhiliang Huang

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

Abstract

China, the world’s largest carbon emitter, urgently needs to improve its carbon emissions efficiency. This study analyzes the impact of tax policy on total factor carbon emission efficiency (TFCEE). Using the Value Added Tax (VAT) reform in China as an exogenous shock and undesirable-SBM model to measure the total factor carbon emission efficiency of 282 cities in China from 2003 to 2019, our multiple difference-in-difference (DID) estimates show that VAT reform significantly improves the TFCEE in the city level. These potential mechanisms show that VAT reform has promoted upgrading industrial structures, stimulated technological innovation, improved human capital, introduced FDI through four channels, and enhanced the TFCEE. The heterogeneity study found that VAT reform has a higher effect on promoting TFCEE in coastal and large megacities than in inland and small and medium-sized cities. This study provides a theoretical basis for policy instruments to improve energy efficiency and the environment.

Suggested Citation

  • Da Gao & Xinlin Mo & Ruochan Xiong & Zhiliang Huang, 2022. "Tax Policy and Total Factor Carbon Emission Efficiency: Evidence from China’s VAT Reform," IJERPH, MDPI, vol. 19(15), pages 1-17, July.
    • Handle: RePEc:gam:jijerp:v:19:y:2022:i:15:p:9257-:d:874646
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/19/15/9257/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/19/15/9257/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yu, Shiwei & Zheng, Shuhong & Li, Xia & Li, Longxi, 2018. "China can peak its energy-related carbon emissions before 2025: Evidence from industry restructuring," Energy Economics, Elsevier, vol. 73(C), pages 91-107.
    2. Fisher-Vanden, Karen & Ho, Mun S., 2007. "How do market reforms affect China's responsiveness to environmental policy?," Journal of Development Economics, Elsevier, vol. 82(1), pages 200-233, January.
    3. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    4. Yongzheng Liu & Jie Mao, 2019. "How Do Tax Incentives Affect Investment and Productivity? Firm-Level Evidence from China," American Economic Journal: Economic Policy, American Economic Association, vol. 11(3), pages 261-291, August.
    5. Zhou, Qianling & Li, Tao & Gong, Liutang, 2022. "The effect of tax incentives on energy intensity: Evidence from China's VAT reform," Energy Economics, Elsevier, vol. 108(C).
    6. Fan Zhang & Gui Jin & Junlong Li & Chao Wang & Ning Xu, 2020. "Study on Dynamic Total Factor Carbon Emission Efficiency in China’s Urban Agglomerations," Sustainability, MDPI, vol. 12(7), pages 1-17, March.
    7. Zhang, Ning & Wei, Xiao, 2015. "Dynamic total factor carbon emissions performance changes in the Chinese transportation industry," Applied Energy, Elsevier, vol. 146(C), pages 409-420.
    8. Huang, Junbing & Cai, Xiaochen & Huang, Shuo & Tian, Sen & Lei, Hongyan, 2019. "Technological factors and total factor productivity in China: Evidence based on a panel threshold model," China Economic Review, Elsevier, vol. 54(C), pages 271-285.
    9. Yu, Huayi, 2012. "The influential factors of China's regional energy intensity and its spatial linkages: 1988–2007," Energy Policy, Elsevier, vol. 45(C), pages 583-593.
    10. Jiangfeng Hu & Zhao Wang & Qinghua Huang & Xiaoqin Zhang, 2019. "Environmental Regulation Intensity, Foreign Direct Investment, and Green Technology Spillover—An Empirical Study," Sustainability, MDPI, vol. 11(10), pages 1-15, May.
    11. Gao, Yuning & Zhang, Meichen, 2019. "The measure of technical efficiency of China’s provinces with carbon emission factor and the analysis of the influence of structural variables," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 120-129.
    12. Li, Ke & Lin, Boqiang, 2017. "Economic growth model, structural transformation, and green productivity in China," Applied Energy, Elsevier, vol. 187(C), pages 489-500.
    13. Curtis, E. Mark & Lee, Jonathan M., 2019. "When do environmental regulations backfire? Onsite industrial electricity generation, energy efficiency and policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 174-194.
    14. Fang, Chuandi & Cheng, Jinhua & Zhu, Yongguang & Chen, Jiahao & Peng, Xinjie, 2021. "Green total factor productivity of extractive industries in China: An explanation from technology heterogeneity," Resources Policy, Elsevier, vol. 70(C).
    15. Gao, Yuning & Zhang, Meichen & Zheng, Jinghai, 2021. "Accounting and determinants analysis of China's provincial total factor productivity considering carbon emissions," China Economic Review, Elsevier, vol. 65(C).
    16. Li, Shengyu, 2018. "A structural model of productivity, uncertain demand, and export dynamics," Journal of International Economics, Elsevier, vol. 115(C), pages 1-15.
    17. Zhang, Yue-Jun & Sun, Ya-Fang & Huang, Junling, 2018. "Energy efficiency, carbon emission performance, and technology gaps: Evidence from CDM project investment," Energy Policy, Elsevier, vol. 115(C), pages 119-130.
    18. Jinkai Li & Jingjing Ma & Wei Wei, 2020. "Analysis and Evaluation of the Regional Characteristics of Carbon Emission Efficiency for China," Sustainability, MDPI, vol. 12(8), pages 1-22, April.
    19. Yao, Xin & Zhou, Hongchen & Zhang, Aizhen & Li, Aijun, 2015. "Regional energy efficiency, carbon emission performance and technology gaps in China: A meta-frontier non-radial directional distance function analysis," Energy Policy, Elsevier, vol. 84(C), pages 142-154.
    20. Zhu, Junming & Niu, Limin & Ruth, Matthias & Shi, Lei, 2018. "Technological Change and Energy Efficiency in Large Chinese Firms," Ecological Economics, Elsevier, vol. 150(C), pages 241-250.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Junmei Qi & Yi Song & Yijun Zhang, 2023. "Environmental Protection Tax and Energy Efficiency: Evidence from Chinese City-Level Data," Energies, MDPI, vol. 16(24), pages 1-24, December.

    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. Zhou, Qianling & Li, Tao & Gong, Liutang, 2022. "The effect of tax incentives on energy intensity: Evidence from China's VAT reform," Energy Economics, Elsevier, vol. 108(C).
    2. Gao, Yuning & Zhang, Meichen & Zheng, Jinghai, 2021. "Accounting and determinants analysis of China's provincial total factor productivity considering carbon emissions," China Economic Review, Elsevier, vol. 65(C).
    3. Ding, Li-Li & Lei, Liang & Zhao, Xin & Calin, Adrian Cantemir, 2020. "Modelling energy and carbon emission performance: A constrained performance index measure," Energy, Elsevier, vol. 197(C).
    4. Cheng, Zhonghua & Li, Lianshui & Liu, Jun & Zhang, Huiming, 2018. "Total-factor carbon emission efficiency of China's provincial industrial sector and its dynamic evolution," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 330-339.
    5. Kong, Dongmin & Xiong, Mengxu & Qin, Ni, 2022. "Business Tax reform and CSR engagement: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. Zha, Donglan & Yang, Guanglei & Wang, Qunwei, 2019. "Investigating the driving factors of regional CO2 emissions in China using the IDA-PDA-MMI method," Energy Economics, Elsevier, vol. 84(C).
    7. Zhang, Yue-Jun & Jiang, Lin & Shi, Wei, 2020. "Exploring the growth-adjusted energy-emission efficiency of transportation industry in China," Energy Economics, Elsevier, vol. 90(C).
    8. Zhou, Qianling & Cui, Xiaoyong & Ni, Hongfu & Gong, Liutang, 2022. "The impact of environmental regulation policy on firms' energy-saving behavior: A quasi-natural experiment based on China's low-carbon pilot city policy," Resources Policy, Elsevier, vol. 76(C).
    9. Zebin Zheng & Wenjun Xiao & Ziye Cheng, 2023. "China’s Green Total Factor Energy Efficiency Assessment Based on Coordinated Reduction in Pollution and Carbon Emission: From the 11th to the 13th Five-Year Plan," Sustainability, MDPI, vol. 15(9), pages 1-20, April.
    10. Xiao, Huijuan & Wang, Daoping & Qi, Yu & Shao, Shuai & Zhou, Ya & Shan, Yuli, 2021. "The governance-production nexus of eco-efficiency in Chinese resource-based cities: A two-stage network DEA approach," Energy Economics, Elsevier, vol. 101(C).
    11. Zhou, Xiaoxiao & Pan, Zixuan & Shahbaz, Muhammad & Song, Malin, 2020. "Directed technological progress driven by diversified industrial structural change," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 112-129.
    12. Zhang, Yue-Jun & Sun, Ya-Fang & Huang, Junling, 2018. "Energy efficiency, carbon emission performance, and technology gaps: Evidence from CDM project investment," Energy Policy, Elsevier, vol. 115(C), pages 119-130.
    13. Fan, Jing-Li & Zhang, Hao & Zhang, Xian, 2020. "Unified efficiency measurement of coal-fired power plants in China considering group heterogeneity and technological gaps," Energy Economics, Elsevier, vol. 88(C).
    14. Hongfeng Zhang & Lu Huang & Yan Zhu & Hongyun Si & Xu He, 2021. "Does Low-Carbon City Construction Improve Total Factor Productivity? Evidence from a Quasi-Natural Experiment in China," IJERPH, MDPI, vol. 18(22), pages 1-21, November.
    15. Lee, Chi-Chuan & Lee, Chien-Chiang, 2022. "How does green finance affect green total factor productivity? Evidence from China," Energy Economics, Elsevier, vol. 107(C).
    16. Yu, Junqing & Zhou, Kaile & Yang, Shanlin, 2019. "Regional heterogeneity of China's energy efficiency in “new normal”: A meta-frontier Super-SBM analysis," Energy Policy, Elsevier, vol. 134(C).
    17. Wang, Manyu & Huang, Ying & An, Zidong & Wei, Chu, 2023. "Reforming the world's largest heating system: Quasi-experimental evidence from China," Energy Economics, Elsevier, vol. 117(C).
    18. Yan Xiao & Yan Zhang & Jiekuan Zhang, 2023. "The Impact of Carbon Emission Trading on Industrial Green Total Factor Productivity," Sustainability, MDPI, vol. 15(7), pages 1-18, April.
    19. Ying Li & Yung-Ho Chiu & Liang Chun Lu, 2018. "Regional Energy, CO 2 , and Economic and Air Quality Index Performances in China: A Meta-Frontier Approach," Energies, MDPI, vol. 11(8), pages 1-20, August.
    20. Liu, Xiaoguang & Ji, Qiang & Yu, Jian, 2021. "Sustainable development goals and firm carbon emissions: Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 103(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:gam:jijerp:v:19:y:2022:i:15:p:9257-:d:874646. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.