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The Impact of Carbon Market and Carbon Tax on Green Growth Pathway in China: A Dynamic CGE Model Approach

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  • Huimin Bi
  • Hao Xiao
  • Kejuan Sun

Abstract

Carbon market and carbon tax affect economic activity in various ways, resulting in different pathways for green growth in China. We build a dynamic computable general equilibrium (CGE) model to discuss the differences in green growth paths induced by differences in intrinsic technical incentives in carbon-abatement policies under three scenarios: a carbon market, a carbon tax, and a mixed policy. The main results are as follows. In carbon market scenario, although the short-term carbon mitigation effect is less prominent, the double dividend of emissions reduction and the gross domestic product (GDP) growth will come about in the long run according to the Porter hypothesis. Carbon tax leads to a relatively dramatic decrease in the growth of GDP and a positive effect on carbon mitigation in the short run; however, these effects decline in the long run. The effect of the mixed policy is not simple combination of the impacts of the above two policies, but shows another pathway for green growth.

Suggested Citation

  • Huimin Bi & Hao Xiao & Kejuan Sun, 2019. "The Impact of Carbon Market and Carbon Tax on Green Growth Pathway in China: A Dynamic CGE Model Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(6), pages 1312-1325, May.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:6:p:1312-1325
    DOI: 10.1080/1540496X.2018.1505609
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    15. Mardones, Cristian & Cabello, Martin, 2019. "Effectiveness of local air pollution and GHG taxes: The case of Chilean industrial sources," Energy Economics, Elsevier, vol. 83(C), pages 491-500.
    16. Liurui Deng & Wentang Xu & Juan Luo, 2021. "Optimal Loan Pricing for Agricultural Supply Chains from a Green Credit Perspective," Sustainability, MDPI, vol. 13(22), pages 1-21, November.
    17. Xiqiang Xia & Mengya Li & Biao Li & Hao Wang, 2021. "The Impact of Carbon Trade on Outsourcing Remanufacturing," IJERPH, MDPI, vol. 18(20), pages 1-18, October.
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    19. Chong Zhang & Zhiying Feng, 2024. "Carbon emissions trading price forecasts by multi-perspective fusion," Economic Analysis Letters, Anser Press, vol. 3(2), pages 13-25, June.
    20. Zhang, Qishi & Li, Bo & Liu, Jing-Yu & Deng, Yizhi & Zhang, Runsen & Wu, Wenchao & Geng, Yong, 2024. "Assessing the distributional impacts of ambitious carbon pricing in China's agricultural sector," Ecological Economics, Elsevier, vol. 217(C).
    21. Xin-gang, Zhao & Shuran, Hu & Hui, Wang & Haowei, Chen & Wenbin, Zhang & Wenjie, Lu, 2024. "Energy, economic, and environmental impacts of electricity market-oriented reform and the carbon emissions trading: A recursive dynamic CGE model in China," Energy, Elsevier, vol. 298(C).
    22. Cao, Jing & Dai, Hancheng & Li, Shantong & Guo, Chaoyi & Ho, Mun & Cai, Wenjia & He, Jianwu & Huang, Hai & Li, Jifeng & Liu, Yu & Qian, Haoqi & Wang, Can & Wu, Libo & Zhang, Xiliang, 2021. "The general equilibrium impacts of carbon tax policy in China: A multi-model comparison," Energy Economics, Elsevier, vol. 99(C).
    23. Biao Li & Yong Geng & Xiqiang Xia & Dan Qiao & Hao Wang, 2021. "Comparatively Analyzing the Impact of Government Subsidy and Carbon Tax Policy on Authorized Remanufacturing," IJERPH, MDPI, vol. 18(16), pages 1-18, August.

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