Exploring the impacts of a carbon tax on the Chinese economy using a CGE model with a detailed disaggregation of energy sectors

Zhengquan Guo, Xingping Zhang, Yuhua Zheng and Rao Rao

Energy Economics, 2014, vol. 45, issue C, 455-462

Abstract: This paper applies a computable general equilibrium model to investigate the impacts of a carbon tax on China's economy and carbon emissions based on China's 2010 Input–Output Table. To obtain robust simulation results, we further disaggregate the energy sectors into eight departments according to energy use characteristics. The empirical results indicate that a moderate carbon tax would significantly reduce carbon emissions and fossil fuel energy consumption and slightly reduce the pace of economic growth. However, a large carbon tax has a significantly negative impact on China's economy and social welfare. Moreover, a large carbon tax would entail marked price changes in China. Of the fossil fuels in use, reducing coal consumption would have the greatest impact on reducing carbon emissions, and the ad valorem duty rate for coal would be the highest after levying a carbon tax because it has the highest carbon emission coefficient. Therefore, China should strive to promote clean coal technology, which may be crucial to reducing carbon emissions. Moreover, levying a carbon tax would improve the use of clean energy, which would be an effective means of reducing carbon emissions. Therefore, the Chinese government should formulate the regulations for and pass a carbon tax as early as possible to achieve its carbon emission abatement target and further contribute to mitigating climate change.

Keywords: Carbon tax; Computable general equilibrium model; Carbon emissions (search for similar items in EconPapers)
JEL-codes: C15 O13 Q47 Q48 Q56 Q58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:455-462

DOI: 10.1016/j.eneco.2014.08.016

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