The Impacts of Environmental Tax in China: A Dynamic Recursive Multi-Sector CGE Model

Bowen Xiao, Dongxiao Niu, Xiaodan Guo and Xiaomin Xu
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Bowen Xiao: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Dongxiao Niu: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Xiaodan Guo: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China
Xiaomin Xu: School of Economics and Management, North China Electric Power University, Hui Long Guan, Chang Ping District, Beijing 102206, China

Energies, 2015, vol. 8, issue 8, 1-28

Abstract: In recent years, the accumulated environmental problems resulting from excessive usage of fossil fuels have gradually loomed. Thus, an environmental tax, as an important policy tool, has been put on the agenda in China. In this paper, a dynamic recursive multi-sector Computable General Equilibrium (CGE) model is applied to explore the impacts of the environmental tax on China’s economy. To comprehensively analyze the impacts, we introduce four kinds of typical contaminants and set two kinds of scenarios: different tax rates and different tax refunds. The results show that the environmental tax is conducive to environmental improvement, but the economic variables are adversely affected, for example, the loss of GDP at the low level tax rate is 0.46%. In order to offset the negative impacts, we presume the government refunds the tax. The results show that this can indeed relieve the negative effects. When the government refunds the production tax and corporate income tax, 0.49% and 0.34% of GDP is relieved by respectively. This paper provides a comprehensive analysis of the implementation of the environmental tax in China and lays a solid foundation for the introduction of the environmental tax.

Keywords: environmental tax; CGE model; tax rate; tax refund (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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