Mitigation pathway of domestic mixed environmental taxes and the effects of trade restrictions on air pollution mitigation in China

Xiurong Hu and Junfeng Liu

No 333460, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: China’s environmental protection tax (EPT) has been implemented since the beginning of 2018 to conquer the severe air pollution problems. Meanwhile, carbon tax (CAT) has been approved as the most effective way on climate mitigation. However, the combined effects across different environmental taxes on emission reduction have not been comprehensively characterized. Besides environmental taxes, changes in trade policy between countries may also influence pollution emissions, which also needs a deeper investigation. In order to provide insights for decision-making on air pollution mitigation under an uncertain worldwide trade policy, we simulated the effects of the combinations of EPT and CAP changes on air pollutants emissions and economic activities. Utilizing a multiple-province computable general equilibrium (CGE) model, we quantify the emissions changes resulting from the individual or mixed policy components: including variating EPT from 2yuan per kilogram emissions to12yuan/kg, CAT from 50yuan per tonne CO2 emissions to 300yuan/tonne. Our results show that although CAP policy may result in greater emission reductions than that of the EPT, the EPT policy is more cost-effective to the CAP policy. Besides, CAP is most redundant to the EPT, while the EPT is complementary to a CAP policy. On province level, in most provinces, carbon pricing could increase the air pollution mitigation but also strengthen the burden of GDP at the same time, while Heilongjiang, Tianjin, Jiangsu, Hainan, Guangxi and Jiangxi provinces could result in air pollution reduction and GDP increase. Provincial distribution is vital for regional equality. We suggest to introduce relative smaller tax rate on provinces who suffer large GDP loss, or provide subsidies to these provinces.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 14
Date: 2022
New Economics Papers: this item is included in nep-cmp, nep-cna, nep-des, nep-ene, nep-env and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333460

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