Assessing the Impacts of Carbon Tax and Improved Energy Efficiency on the Construction Industry: Based on CGE Model

Abstract

The rapid development of energy consumption and carbon emissions in the construction industry poses an enormous and negative challenge for China’s energy and environment. While maintaining moderate economic growth, it is particularly important to realize energy conservation and carbon reduction. Carbon tax policy, a direct tool to reduce carbon emissions, can effectively alleviate the environmental issues caused by construction activities. However, relying solely on a single method is insufficient to handle the complicated circumstances of China’s construction industry. This study explores the influence of carbon tax on the construction industry through adjustments to tax rates via developing a Computable General Equilibrium (CGE) model. Then, it analyzes how the carbon tax affects the economic and environmental variables by designing scenarios for recycling tax revenue and improved energy efficiency. The results indicate that the carbon tax rate of 40 RMB/t-CO2 is the most appropriate. At this tax level, the negative impacts of energy demand and emissions reduction on macroeconomy and construction industry are minimized. It was also determined that carbon tax revenue recycling to households and sectoral investment will realize the “weak double dividend” effect on the construction industry. Furthermore, improving energy efficiency in the construction industry will demonstrate the additional advantages of carbon tax. This study serves as a theoretical foundation for the Chinese government to develop various energy strategies to achieve low-carbon development in the construction industry.