Assessing the effectiveness and fairness of carbon tax based on the water-energy-carbon nexus of household water use

Abstract

Implementing management strategies such as carbon tax to mitigate climate change should be grounded in a rigorous understanding of the effects on heterogeneous households. However, traditionally used equilibrium-based or optimization-based models lump heterogeneous stakeholders with one representative one and narrow tax effects to the emission reduction and cost distribution, leading to unpractical policies. This work proposes a new agent-based framework with explicit representations of macro water-energy-carbon nexus and micro individual behaviors to assess the effectiveness and fairness of carbon tax. The framework encompasses households' behaviors under income heterogeneity and information asymmetry. A case study in Lhasa reveals that, carbon tax is effective for emission reduction while engenders multidimensional inequality across income groups. Levying carbon tax reduces the carbon intensity for water and energy by 1.5% and 6.0%, respectively, in 2049. However, carbon tax adds barriers to the adoption of cleaner energy and advanced appliances while promoting conservation behaviors of low-income groups. Our results also reveal the regressive distribution effects of carbon tax, supporting the distribution inequality of the tax. Our analysis provides new insights on the disentanglement of the effectiveness and fairness of carbon tax which could be extended to the development of compensation strategies to enhance the effectiveness and mitigate inequalities.