An Integrated Assessment of the Economic Costs and Environmental Benefits of Carbon Taxes in China

The rapid economic growth in China has brought a parallel degradation of the environment that is of great concern to policy makers. A more recent policy concern is the international pressure for controlling carbon emissions. We analyze the costs and benefits of various carbon tax policies. The complex links between economic activity, energy use, emissions, air quality and human health requires an integrated approach. In collaboration with researchers in several fields of environmental sciences, we tie together a multi-sector economic model, a detailed emissions inventory, an advanced atmospheric model (GEOS-CHEM), and health assessment tools (BenMAP model). We find that a modest carbon tax would not only reduce CO2 emissions substantially, but also achieving a sizable ancillary benefits by reducing local air pollution, and the likely negative economic costs are modest. Then we compared six carbon tax proposals to shed some light on future carbon tax reform in China.