Balancing Growth and Emission Reduction: Evaluating Carbon Tax’s Impact on Sustainable Development in China

Ruilin Li, Xiaoqian Song (), Aiwen Zhao, Xi Zhang, Jiajie Li, Ziao Yu and Hong Sun
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Ruilin Li: School of Political Science and Economics, Yonsei University, Seoul 03722, Republic of Korea
Xiaoqian Song: School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai 200030, China
Aiwen Zhao: College of Finance, Xuzhou University of Technology, Xuzhou 221018, China
Xi Zhang: School of Business, University of Shanghai for Science and Technology, Shanghai 200093, China
Jiajie Li: Key Laboratory of Ministry of Education for Efficient Mining and Safety of Metal Mines, School of Resource and Safety Engineering, University of Science and Technology Beijing, Beijing 100083, China
Ziao Yu: Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200030, China
Hong Sun: Zao Zhuang Mining Group Co., Ltd., Zaozhuang 277000, China

Sustainability, 2025, vol. 17, issue 10, 1-16

Abstract: The carbon tax is a crucial economic instrument for China; it aims to encourage the reduction of carbon emissions and provide additional revenue for the government in order to promote the transformation of society towards low-carbon and sustainable development. The suboptimal carbon tax refers to the carbon tax rate that achieves the best balance between emission reduction targets and economic benefits. Using China’s 2020 Non-competitive Input–Output Table, which encompasses 42 sectors, alongside carbon emission data sourced from the China Carbon Emission Accounts and Datasets (CEADs) covering 47 sectors, this study established a Carbon Tax-adjusted Input–Output Table of China’s Non-competitive Carbon Emissions 2020 (26 sectors) and constructed a multi-objective suboptimal carbon tax model based on an input–output price change model. Based on these, the suboptimal carbon tax rates under four different sets of constraints were simulated, including 49.2 CNY/ton (low inflation), 98.3 CNY/ton (low-to-medium inflation), 147.1 CNY/ton (medium-to-high inflation), and 195.5 CNY/ton (high inflation). We found that the suboptimal carbon tax should take into account its impact on prices, carbon reduction, and GDP, and higher carbon tax rates lead to more significant macroeconomic impacts and increased efforts in reducing emissions. Policy recommendations have also been put forward, such as launching a comprehensive research framework, establishing a synergistic and complementary mechanism between carbon taxation and carbon trading, designing a dynamic carbon tax, etc.

Keywords: suboptimal carbon tax; economic effects; emission reduction effects; sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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