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

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  • Guo, Zhengquan
  • Zhang, Xingping
  • Zheng, Yuhua
  • Rao, Rao

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.

Suggested Citation

  • Guo, Zhengquan & Zhang, Xingping & Zheng, Yuhua & Rao, Rao, 2014. "Exploring the impacts of a carbon tax on the Chinese economy using a CGE model with a detailed disaggregation of energy sectors," Energy Economics, Elsevier, vol. 45(C), pages 455-462.
  • Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:455-462
    DOI: 10.1016/j.eneco.2014.08.016
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    References listed on IDEAS

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    More about this item

    Keywords

    Carbon tax; Computable general equilibrium model; Carbon emissions;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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