Recycling Carbon Tax under Different Energy Efficiency Improvements: A CGE Analysis of China

Weijiang Liu, Tingting Liu, Yangyang Li and Min Liu
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Weijiang Liu: Center for Quantitative Economics, Jilin University, Changchun 130012, China
Tingting Liu: Business School, Jilin University, Changchun 130012, China
Yangyang Li: Business School, Jilin University, Changchun 130012, China
Min Liu: Business School, Jilin University, Changchun 130012, China

Sustainability, 2021, vol. 13, issue 9, 1-17

Abstract: Carbon emission reductions and sustainable development have become hot issues in international conferences. As the most direct instrument for carbon emission reductions, the carbon tax has not been favored by policymakers because of its negative effect on the economy. To achieve low-carbon sustainable development, we use a computable general equilibrium (CGE) model to simulate carbon tax recycling under different energy transfer efficiency improvements to achieve triple dividends of carbon emission reductions and social welfare improvement. This paper contributes to the literature on recycling carbon tax for triple dividends in China. The simulation has three main findings: (i) the carbon tax revenue recycling toward reducing the resident income tax rate yields triple dividends without any energy transfer efficiency improvement; (ii) the losses of GDP and social welfare are exaggerated. Meanwhile, the carbon tax brings down carbon emissions and total carbon intensity of GDP with a mild impact on the Chinese economy; (iii) the improvement of energy transfer efficiency demonstrates the advantages of recycling carbon tax and is essential for achieving triple dividends. Thus, we propose the following policy recommendations: (i) the pilot carbon tax mechanism should be launched in high-carbon sectors (such as coal) and then implemented in other industries gradually; (ii) the government should strongly support the technological improvement of energy transfer efficiency in order to achieve sustainable development.

Keywords: CGE model; carbon tax; revenue recycling; triple dividends (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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