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Assessing the Distributional Impacts of Carbon Tax among Households across Different Income Groups: The Case of China

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  • Qiao-Mei Liang
  • Qian Wang
  • Yi-Ming Wei

Abstract

Employing the improved China Energy and Environmental Policy Analysis (CEEPA) model, a recursive dynamic computable general equilibrium model, this study aims to examine the distributional impacts of a carbon tax in China on households over different income groups. The effects of different complementary measures were also analysed. The results indicate that without any protections for households, a carbon tax will widen the income and welfare gap not only between urban and rural but also within urban groups, though it could have a weakly progressive effect within the rural. If the carbon tax revenue is used to reduce indirect tax whilst appropriately increasing government transfers to rural households and vulnerable urban groups in proportion to population, the distributional deterioration caused by the carbon tax could be effectively mitigated, and the negative impact on the living standards of households over all income groups could be alleviated while maintaining emission reductions and minimising the overall socio-economic impacts.

Suggested Citation

  • Qiao-Mei Liang & Qian Wang & Yi-Ming Wei, 2013. "Assessing the Distributional Impacts of Carbon Tax among Households across Different Income Groups: The Case of China," Energy & Environment, , vol. 24(7-8), pages 1323-1346, December.
    • Handle: RePEc:sae:engenv:v:24:y:2013:i:7-8:p:1323-1346
    DOI: 10.1260/0958-305X.24.7-8.1323
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    References listed on IDEAS

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    Cited by:

    1. Gao, Zhiyuan & Zhao, Ying & Li, Lianqing & Hao, Yu, 2024. "Economic effects of sustainable energy technology progress under carbon reduction targets: An analysis based on a dynamic multi-regional CGE model," Applied Energy, Elsevier, vol. 363(C).
    2. Jiang, Hong-Dian & Xue, Mei-Mei & Liang, Qiao-Mei & Masui, Toshihiko & Ren, Zhong-Yuan, 2022. "How do demand-side policies contribute to the electrification and decarburization of private transportation in China? A CGE-based analysis," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    3. Wang, Qian & Hubacek, Klaus & Feng, Kuishuang & Guo, Lin & Zhang, Kun & Xue, Jinjun & Liang, Qiao-Mei, 2019. "Distributional impact of carbon pricing in Chinese provinces," Energy Economics, Elsevier, vol. 81(C), pages 327-340.
    4. Wang, Qian & Hubacek, Klaus & Feng, Kuishuang & Wei, Yi-Ming & Liang, Qiao-Mei, 2016. "Distributional effects of carbon taxation," Applied Energy, Elsevier, vol. 184(C), pages 1123-1131.
    5. Tram T.H. Nguyen and Wonho Song, 2021. "Carbon Pricing and Income Inequality: An Empirical Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 46(2), pages 155-182, June.
    6. Qian Wang & Qiao-Mei Liang & Bing Wang & Fang-Xun Zhong, 2016. "Impact of household expenditures on CO2 emissions in China: Income-determined or lifestyle-driven?," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 353-379, November.
    7. Teng, Qiang & Zhang, Yu-Fei & Jiang, Hong-Dian & Liang, Qiao-Mei, 2023. "Economy-wide assessment of achieving carbon neutrality in China's power sector: A computable general equilibrium analysis," Renewable Energy, Elsevier, vol. 219(P2).
    8. Yun-Fei Yao & Qiao-Mei Liang, 2016. "Approaches to carbon allowance allocation in China: a computable general equilibrium analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 333-351, November.
    9. Qian Wang & Qiao-Mei Liang, 2015. "Will a carbon tax hinder China’s efforts to improve its primary income distribution status?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 20(8), pages 1407-1436, December.
    10. Zhang, Hongxia & Hewings, Geoffrey J.D. & Zheng, Xinye, 2019. "The effects of carbon taxation in China: An analysis based on energy input-output model in hybrid units," Energy Policy, Elsevier, vol. 128(C), pages 223-234.

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