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Effects of Differentiated Carbon Taxes on Carbon Emissions and Economic Development: The Case of Taiwan

In: Carbon Neutrality, Climate Resilience and Sustainable Development in Asia

Author

Listed:
  • Wen-Hsiu Huang

    (Feng Chia University, Department of Public Finance)

  • Hung-Lin Yeh

    (Feng Chia University, Department of Public Finance)

Abstract

Carbon taxes are a key tool for cutting emissions and promoting renewable energy, but debate persists over whether rates should be uniform or differential. This study used the Energy-Environment-Economy Global Macro-Econometric (E3ME) model to investigate the environmental and economic impacts of different carbon tax systems in Taiwan. We compared the effects of three carbon tax schemes, including uniform carbon taxes, differentiated carbon taxes based on total carbon emissions by sector, and differentiated carbon taxes based on carbon emission intensity by sector. Our results indicated that differentiated carbon taxes led to better economic, environmental, and income distribution outcomes than a uniform carbon tax rate. Specifically, differentiated carbon taxes based on total carbon emissions by sector were found to be the optimal choice. Although differentiated carbon taxes may lead to carbon leakage, the leakage rates in our simulation gradually decreased due to the international mobility of the capital market and industrial competition.

Suggested Citation

  • Wen-Hsiu Huang & Hung-Lin Yeh, 2026. "Effects of Differentiated Carbon Taxes on Carbon Emissions and Economic Development: The Case of Taiwan," Springer Books, in: Soocheol Lee & Ya-wen Chiueh & Rintaro Yamaguchi & Budy P. Resosudarmo & Pham Khanh Nam & Jin-Li Hu (ed.), Carbon Neutrality, Climate Resilience and Sustainable Development in Asia, chapter 0, pages 3-21, Springer.
    • Handle: RePEc:spr:sprchp:978-981-95-5613-7_1
    DOI: 10.1007/978-981-95-5613-7_1
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