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Would carbon tax policy promote real estate prices?

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  • Ma, Li
  • Sang, Di

Abstract

Real estate plays a pivotal role in carbon emissions. Carbon tax policy is a crucial measure for mitigating enterprises' carbon emissions. However, imposing a carbon tax on productive enterprises in the real estate industry to reduce emissions may increase their production costs, which could easily be passed on to buyers, thus inflating real estate prices and impeding policy effectiveness. To examine the impact and negative consequences of carbon tax policy applied to the real estate industry, we develop a dynamic stochastic general equilibrium model encompassing building materials manufacturers, real estate firms, and the environmental regulatory government. Findings indicate that implementing the carbon tax policy significantly reduces carbon emissions in the real estate industry. However, the existence of a price transmission mechanism makes carbon tax policies susceptible to driving up real estate prices. Further welfare analysis shows that increasing carbon tax rates will result in social welfare losses, allowing the government to modify and refine its policy objectives.

Suggested Citation

  • Ma, Li & Sang, Di, 2024. "Would carbon tax policy promote real estate prices?," International Review of Financial Analysis, Elsevier, vol. 96(PA).
  • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924006008
    DOI: 10.1016/j.irfa.2024.103668
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    More about this item

    Keywords

    Carbon tax policy; Reduce carbon emission; Real estate price; Household welfare;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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