Distributional effects of a carbon tax on Chinese households: A case of Shanghai

Zhujun Jiang and Shuai Shao

Energy Policy, 2014, vol. 73, issue C, 269-277

Abstract: As an effective policy instrument to reduce CO2 emissions, the effects of a carbon tax on distribution have been the critical factor in determining whether a carbon tax will be acceptable in China. Taking Shanghai as an example, which is the economic center and front-runner of China, this paper estimates the distributional effect of a carbon tax on households in various income groups by using the input–output model and the Suits index. The results indicate that the comprehensive distributional effect of the carbon tax is regressive. The expenditure of the low-income group caused by the carbon tax accounts for 0.853% of the total expenditure, while that of the high-income group 0.712%. The direct distributional effect presents a weak progressivity, while the indirect one is significantly regressive, and the latter is much larger than the former. Moreover, the Suits index of the carbon tax is −0.078, implying that the carbon tax burden on the low-income group is the highest and thus that a carbon tax can intensify income inequality. Therefore, when introducing a carbon tax, some rational associated redistribution or compensation measures, such as purposive transfer payments, should be implemented to restrict or even eliminate the regressivity of the carbon tax.

Keywords: Carbon tax; Distributional effect; Suits index (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421514003772
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:73:y:2014:i:c:p:269-277

DOI: 10.1016/j.enpol.2014.06.005

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().