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Impacts of U.S. Carbon Tariffs on China’s Foreign Trade and Social Welfare

Author

Listed:
  • Wenwen Zhang

    () (Energy Center, University of Auckland, Auckland 1010, New Zealand)

  • Shichun Xu

    () (Management School, China University of Mining and Technology, Xuzhou 221116, China)

  • Zhengxia He

    () (Business School, Jiangsu Normal University, Xuzhou 221116, China)

  • Basil Sharp

    () (Energy Center, University of Auckland, Auckland 1010, New Zealand)

  • Bin Zhao

    () (Pacific Northwest National Laboratory, Richland, WA 99352, USA)

  • Shuxiao Wang

    () (State Key Joint Laboratory of Environmental Simulation and Pollution Control, School of Environment, Tsinghua University, Beijing 100084, China)

Abstract

A recursive multisector dynamic computable general equilibrium (DCGE) model simulates the economic impacts of carbon tariffs, as proposed by the USA, ranging from $40/t to $60/t CO 2 . We examine a carbon tax and export subsidy as response policies to the U.S. carbon tariff, respectively. The dynamic model shows the possible impacts of these policies on China’s economic structure, carbon emissions, and social welfare from 2020 to 2030. Simulations show that a carbon tariff changes the structure of China’s exports and promotes trade diversion from the USA to other countries and regions. A domestic carbon tax and subsidy policy can dampen the adverse impacts of carbon tariffs on trade. A carbon tax shows an effective impact on increasing clean energy use, decreasing the carbon intensity of output, and reducing carbon emissions. A subsidy on exports to the USA reduces the adverse impact of a carbon tariff on China’s social welfare in the short term.

Suggested Citation

  • Wenwen Zhang & Shichun Xu & Zhengxia He & Basil Sharp & Bin Zhao & Shuxiao Wang, 2019. "Impacts of U.S. Carbon Tariffs on China’s Foreign Trade and Social Welfare," Sustainability, MDPI, Open Access Journal, vol. 11(19), pages 1-21, September.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5278-:d:270681
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    Keywords

    carbon tariffs; response policy; carbon emissions; trade; energy structure;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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