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Can Carbon Tax Complement Emission Trading Scheme? The Impact Of Carbon Tax On Economy, Energy And Environment In China

Author

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  • BOQIANG LIN

    (School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian 361005, P. R. China)

  • ZHIJIE JIA

    (School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Fujian 361005, P. R. China)

Abstract

The problems of excessive CO2 emissions and global warming caused by human activities are becoming more serious. Carbon Tax (CT) and Emission Trading Scheme (ETS) are popular emission mitigation mechanisms. This paper establishes four counter-factual (CF) scenarios with different CT rate, and constructs a dynamic recursive computable general equilibrium (CGE) model, named China Energy-Environment-Economy Analysis (CEEEA) model, to study the impact of different CT rate on the economy, energy and environment. The results indicate that if CT complement ETS, and the cap of ETS is based on grandfathering method, the carbon trading price will reduce due to the changes in carbon allowances demand and supply. CT can share the mitigation pressure from ETS coverages into non-ETS coverages. When CT complement ETS but nothing is changed in mechanism of emission trading, the total emission mitigation effect will reduce slightly but the mitigation cost will reduce significantly. All in all, using CT as the supplement is a good mitigation strategy to release Gross Domestic Product (GDP) loss. But if we want to get more mitigation effect, rising CT rate or a stricter carbon cap may help.

Suggested Citation

  • Boqiang Lin & Zhijie Jia, 2020. "Can Carbon Tax Complement Emission Trading Scheme? The Impact Of Carbon Tax On Economy, Energy And Environment In China," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(03), pages 1-29, August.
    • Handle: RePEc:wsi:ccexxx:v:11:y:2020:i:03:n:s201000782041002x
    DOI: 10.1142/S201000782041002X
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    Cited by:

    1. Su, Chi-Wei & Yuan, Xi & Tao, Ran & Shao, Xuefeng, 2022. "Time and frequency domain connectedness analysis of the energy transformation under climate policy," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    2. You-Yi Guo & Jin-Xu Lin & Shih-Mo Lin, 2022. "The Distribution Effects of a Carbon Tax on Urban and Rural Households in China," Sustainability, MDPI, vol. 14(13), pages 1-15, June.
    3. Xu, Bin & Luo, Yuemei & Xu, Renjing & Chen, Jianbao, 2021. "Exploring the driving forces of distributed energy resources in China: Using a semiparametric regression model," Energy, Elsevier, vol. 236(C).
    4. Weijiang Liu & Min Liu & Tingting Liu & Yangyang Li & Yizhe Hao, 2022. "Does a Recycling Carbon Tax with Technological Progress in Clean Electricity Drive the Green Economy?," IJERPH, MDPI, vol. 19(3), pages 1-18, February.
    5. Guoyu Wang & Jinsheng Zhou, 2022. "Multiobjective Optimization of Carbon Emission Reduction Responsibility Allocation in the Open-Pit Mine Production Process against the Background of Peak Carbon Dioxide Emissions," Sustainability, MDPI, vol. 14(15), pages 1-21, August.
    6. Wen, Shiyan & Jia, Zhijie, 2022. "The energy, environment and economy impact of coal resource tax, renewable investment, and total factor productivity growth," Resources Policy, Elsevier, vol. 77(C).
    7. Zhang, Jiekuan, 2023. "Emissions trading scheme and energy consumption and output structure: Evidence from China," Renewable Energy, Elsevier, vol. 219(P1).
    8. Jia, Zhijie & Wen, Shiyan & Sun, Zao, 2022. "Current relationship between coal consumption and the economic development and China's future carbon mitigation policies," Energy Policy, Elsevier, vol. 162(C).
    9. Zhou, Bihua & Huang, Yun & Zhao, Yihang, 2024. "Research on the incentive effect of the policy combination of carbon-reduction pilot cities," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 456-475.
    10. Weijiang Liu & Min Liu & Yangyang Li & Tingting Liu, 2024. "How to promote China's green economic development? The combination effects of consumption tax and carbon tax policies," Energy & Environment, , vol. 35(3), pages 1374-1395, May.
    11. Jia, Zhijie & Lin, Boqiang, 2021. "How to achieve the first step of the carbon-neutrality 2060 target in China: The coal substitution perspective," Energy, Elsevier, vol. 233(C).
    12. Jia, Zhijie & Wen, Shiyan & Liu, Yu, 2022. "China's urban-rural inequality caused by carbon neutrality: A perspective from carbon footprint and decomposed social welfare," Energy Economics, Elsevier, vol. 113(C).
    13. Shuyang Chen, 2022. "The inequality impacts of the carbon tax in China," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-10, December.
    14. Guo, Jian & Zhong, Minghao & Chen, Shuran, 2022. "Analysis and simulation of BECCS vertical integration model in China based on evolutionary game and system dynamics," Energy, Elsevier, vol. 252(C).

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