Effects of Differentiated Carbon Taxes on Carbon Emissions and Economic Development: The Case of Taiwan

Wen-Hsiu Huang and Hung-Lin Yeh
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Wen-Hsiu Huang: Feng Chia University, Department of Public Finance
Hung-Lin Yeh: Feng Chia University, Department of Public Finance

Chapter Chapter 1 in Carbon Neutrality, Climate Resilience and Sustainable Development in Asia, 2026, pp 3-21 from Springer

Abstract: Abstract Carbon taxes are a key tool for cutting emissions and promoting renewable energy, but debate persists over whether rates should be uniform or differential. This study used the Energy-Environment-Economy Global Macro-Econometric (E3ME) model to investigate the environmental and economic impacts of different carbon tax systems in Taiwan. We compared the effects of three carbon tax schemes, including uniform carbon taxes, differentiated carbon taxes based on total carbon emissions by sector, and differentiated carbon taxes based on carbon emission intensity by sector. Our results indicated that differentiated carbon taxes led to better economic, environmental, and income distribution outcomes than a uniform carbon tax rate. Specifically, differentiated carbon taxes based on total carbon emissions by sector were found to be the optimal choice. Although differentiated carbon taxes may lead to carbon leakage, the leakage rates in our simulation gradually decreased due to the international mobility of the capital market and industrial competition.

Keywords: Carbon tax; Differential tax rates; Carbon emission; E3ME; Carbon leakage (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-95-5613-7_1

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DOI: 10.1007/978-981-95-5613-7_1

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