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Carbon Tax, Subsidy, and Emission Reduction: Analysis Based on DSGE Model

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  • Haoran Li
  • Wei Peng

Abstract

Carbon emission has negative externalities, which will cause severe natural and social problems. In recent years, more and more attention has been paid to carbon emission reduction issue both in academic and application fields. This paper aims to explore the impact of punitive carbon tax and incentive carbon emission reduction subsidy on economy and environment through the dynamic stochastic general equilibrium (DSGE) framework. The results show that both carbon tax and carbon emission reduction subsidy policies can help to reduce carbon emissions and to improve environment quality. In addition, carbon emission reduction subsidy has a positive impact on economy, while carbon tax has the opposite impact. It follows that the incentive carbon emission reduction policy is more conducive to the coordinated development of economy and environment. This research can be a guideline for the government to formulate carbon emission abatement policies from the perspective of coordinated development.

Suggested Citation

  • Haoran Li & Wei Peng, 2020. "Carbon Tax, Subsidy, and Emission Reduction: Analysis Based on DSGE Model," Complexity, Hindawi, vol. 2020, pages 1-10, December.
    • Handle: RePEc:hin:complx:6683482
    DOI: 10.1155/2020/6683482
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    Cited by:

    1. Katharine Heyl & Felix Ekardt & Lennard Sund & Paula Roos, 2022. "Potentials and Limitations of Subsidies in Sustainability Governance: The Example of Agriculture," Sustainability, MDPI, vol. 14(23), pages 1-26, November.
    2. Qian Zhang & Yunjia Wang & Lu Liu, 2023. "Carbon Tax or Low-Carbon Subsidy? Carbon Reduction Policy Options under CCUS Investment," Sustainability, MDPI, vol. 15(6), pages 1-26, March.
    3. Nan Li & Beibei Shi & Rong Kang, 2021. "Information Disclosure, Coal Withdrawal and Carbon Emissions Reductions: A Policy Test Based on China’s Environmental Information Disclosure," Sustainability, MDPI, vol. 13(17), pages 1-24, August.

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