How to Make The Fiscal policies Greener in China?——Based on The Perspective of Environmental Macroeconomics

Hongyou Lu, Wenli Xu () and Kun Xu

MPRA Paper from University Library of Munich, Germany

Abstract: From the perspective of environmental macroeconomics, in addition to environmental equilibrium effected by environmental policies, the fiscal policy have an impact on the environment equilibrium. On this basis, this paper constructs a RBC model with environmental equilibrium, that contains different financing mode of government environmental expenditure, within which incorporating fiscal spending shocks, labor income tax rate shock, capital income tax rate shock and environmental tax shock. Utilizing the historically macroeconomic data during 1978 to 2014, this paper estimate the long-run steady-state of macroeconomic and environmental variables, then simulate short-run fluctuation of these macro-variables. The results show that:(1) government environmental expenditure being arranged in the general budget, taxing emission achieve the "double dividend" that output increase by 0.13%, and the stock of carbon dioxide fall by 1.1%; (2) changes of environmental tax rates is one important source of volatility in the stock of carbon dioxide, volatility contribution rate of 87%; (3) changes in fiscal policy have a significant impact on short-term fluctuations of carbon dioxide, and the environmental effects of direction caused by expansionary fiscal policy depend on the fiscal policy type. Based on the above conclusions, this paper suggests the introduction of environmental taxes as quickly as possible, government environmental expenditure take the general tax financing mode, and a combination of modest increase in fiscal expenditure, reducing labor income tax rate and inceasing capital income tax rate in order to promote green development during "Thirteen Five Plan" period.

Keywords: environmental tax; finacing mode; fiscal policies; business cycle (search for similar items in EconPapers)
JEL-codes: E62 H23 H3 Q5 (search for similar items in EconPapers)
Date: 2016-03-23
New Economics Papers: this item is included in nep-cna, nep-env, nep-mac, nep-pbe and nep-tra
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