Carbon‐Based Public Finance: Debt‐Alleviating Effects of a Carbon Tax in China

In order to cope with the climate problem of global warming and respond to the call of the United Nations to reduce carbon emissions, China has put the goals of carbon peaking in 2030 and carbon neutrality in 2060 forward and has promoted the transformation and upgrading of the economic development mode and the green, low-carbon development path. In international practice, various countries have widely adopted the carbon trading market and tax policy as effective carbon emission reduction mechanisms and tools. In 2012, China implemented a carbon trading pilot project and established a national unified carbon trading market in 2021 based on accumulated experience, but the carbon tax has not yet been introduced. According to the international carbon tax practice and the current situation in China, the introduction of the carbon tax is conducive to the establishment of a sound carbon emission reduction system and the promotion of green and low-carbon development from the macro-control level. In this paper, we analyzed the necessity and theoretical research of carbon tax policy in China and explored the feasibility of a carbon tax in China by combining the internationally advanced carbon tax practice. By establishing a CGE model at the carbon-tax level and using the social accounting matrix (SAM) as the database, we simulated the impact of implementing carbon tax policies under different carbon tax prices on China’s environmental and economic benefits and whether the double-dividend effect of a carbon tax can be effectively realized. The results show that the carbon tax will help reduce carbon emissions and significantly affect carbon reduction. However, in the short term, it has a negative effect on economic development. Accordingly, it is suggested that a scientific carbon tax system should be established according to national conditions, and a carbon tax should be introduced at a lower carbon tax price. The carbon tax should be supplemented by carbon tax subsidies to ensure effective carbon emission reduction so as to alleviate the inhibiting effect on economic development. At the same time, the compound carbon emission reduction mechanism of carbon trading and tax should be improved to lay the institutional foundation for the early realization of the carbon neutrality target.

Carbon markets devolve governance to external institutions and displace power from sovereign states. Major producers in these markets, notably China, have expressed concern about the adverse implications for national interests and sovereignty associated with selling off the rights to emit carbon emissions abroad. This article suggests that such concern has shaped the discursive context in which emission trading schemes have gained popularity in the country. Our discourse analysis shows that notions of market power are made manifest as a powerful storyline. In the Chinese language, “power,” “sovereignty,” and “rights” all use the same character. The storyline captures all these expressions and allows for a positive view about active engagement in carbon trading as a way to protect development rights and redeem carbon sovereignty. Thus, the contested policy of emissions trading becomes embedded in the more appealing narrative of national development and made politically attractive, despite unfavorable realities against it.

China has established a nationwide carbon quota trading market. Drawing upon international experiences and the strategic vision of the Chinese government, it is anticipated that China will soon incorporate a carbon tax system. The futurescape envisions a parallel progression of both the carbon market and the carbon tax system. This prompts an exploration into the circumstances where one should prioritize the carbon market system over the other, and vice versa. This paper constructs a repeated oligopoly game model to juxtapose equilibrium points under both carbon trading and tax regimes. Through rigorous analysis, it is discerned that under a duopoly with bounded rationality and inelastic pricing, if the carbon tax is set referencing the clearing price of the carbon market, then both the carbon trading and tax regimes can achieve identical emission reduction outcomes. Stemming from this revelation, for regions with established inelastic, oligopolistic carbon markets, it would be prudent to manage emission sources not included in the carbon market by setting a carbon tax in line with the market's clearing emission price. Furthermore, measures might be considered to dismantle such oligopolistic dominance to enhance emission reduction efficiency, or to transition from the carbon market to a tax regime for cost-efficient administration. For regions yet to embrace a carbon pricing mechanism, if there's an anticipation of forming an oligopolistic and inelastic carbon market, given the lower administrative costs, diminished enterprise operational risks, and broader coverage of the carbon tax regime, the region should gravitate towards the carbon tax system as a priority. Received: 30 August 2023 | Revised: 30 October 2023 | Accepted: 12 November 2023 Conflicts of Interest The author declares that he has no conflicts of interest to this work. Data Availability Statement Data available on request from the corresponding author upon reasonable request. Author Contribution Statement Yu Chang: Conceptualization, Methodology, Validation, Formal analysis, Data curation, Writing - original draft, Writing - review & editing.

A comparative study on the environmental and economic effects of a resource tax and carbon tax in China: Analysis based on the computable general equilibrium model

Low carbon economy was carried out among some of the developed countries in the early 1990s. And it has become the guidelines of economic development globally since the 21st century. From the fact that China has been the largest carbon dioxide emitter in the world, this paper evaluates the innovations and practices, which have been adopted by the developed countries to develop low carbon economy, and their strengths and weaknesses. Analyzing the theory of Pigouvian Taxes, the requirements from the world, the domestic pressure, economic impacts, international trade conflicts, management costs and some other aspects, this paper emphasizes the necessity and feasibility of introducing carbon tax in China. After discussing the advantages and disadvantages of various policies (including the carbon tax), the features of independent carbon tax and mixed carbon tax and the international experience, the article proposes some advice on levying carbon tax in China.

In order to reduce the cost pressure on cold-chain logistics brought by the carbon tax policy, this paper investigates optimization of Vehicle Routing Problem (VRP) with time windows for cold-chain logistics based on carbon tax in China. Then, a green and low-carbon cold chain logistics distribution route optimization model with minimum cost is constructed. Taking the lowest cost as the objective function, the total cost of distribution includes the following costs: the fixed costs which generate in distribution process of vehicle, transportation costs, damage costs, refrigeration costs, penalty costs, shortage costs and carbon emission costs. This paper further proposes a Cycle Evolutionary Genetic Algorithm (CEGA) to solve the model. Meanwhile, actual data are used with CEGA to carry out numerical experiments in order to discuss changes of distribution routes with different carbon emissions under different carbon taxes and their influence on the total distribution cost. The critical carbon tax value of carbon emissions and distribution cost is obtained through experimental analysis. The research results of this paper provide effective advice, which is not only for the government on carbon tax decision, but also for the logistics companies on controlling carbon emissions during distribution.

Environmental taxation system generally refers to all taxes imposed in order to achieve certain environmental objectives. To introduce a carbon tax is imperative in China because it will perfect China’s environmental taxation system, mitigate China’s pressure of CO2 emission, establish the image of China as a responsible power, change China’s economic growth pattern, and respond to the international “Carbon Tariff”. Foreign practice shows that negative impact of a carbon tax on economic growth is not large, but it can promote low carbon economic development. In order to perfect environmental taxation system, introduction carbon tax in China should be noticed: to focus on the setup of carbon tax exemption clause, the selection of a reasonable introduction opportunity, the formation of environmental and economic policy force, the choice of progressive carbon tax rate, and the follow the principle of tax revenue neutral.

How to improve the performance of carbon tax in China?

One of the key issues facing the government in achieving carbon neutrality is what methods can be used to effectively reduce carbon emissions. Taking manufacturing enterprises as an example, this paper studies the carbon emission reduction effects of green technology innovation subsidy (GIS), carbon tax (CT), and carbon emission trading (CET). Under the background of social welfare and carbon emission reduction efficiency, we get the results of optimal carbon emission reduction measures in different environments. The results are as follows: (1) In the initial and mature stage of green technology innovation, GIS is the best choice to improve the degree of green manufacturing and maximize social welfare. CT and CET are the best choice to obtain the highest SE (carbon emission reduction efficiency). (2) In the transitional stage, CET and CT can promote the maturity of green technology. However, with the maturity of green technology, the promotion of green technology has weakened. CT is the best choice to achieve the highest SE. (3) When the carbon tax or carbon trading price is at a high or low level, raising the tax rate or carbon trading price can increase the income of enterprises. Therefore, the government should take measures according to the objectives of different stages. When the goal is to maximize social benefits, GIS is the best choice in the initial stage and transition stage, and CET or CT is the best choice in the transition stage. In the initial stage and fertilization stage, when the highest SE, CT, or CET is the best choice, while in the transition stage, CT is the best choice.

Studying the characteristics, trends, and evolution of carbon emissions in agricultural related sectors is of great significance for rational formulation of carbon emission reduction policies. However, as an important carbon emission reduction policy, carbon tax has been controversial over whether or not it should be levied on China. Based on this consideration, this paper takes China’s agricultural related sectors as an example and analyzes the degree of carbon tax on macro-environment, macroeconomy, and agricultural sectors during the period 2020–2050 by constructing a 3EAD-CGE (economy-energy-environmental-agricultural-dynamics Computable General Equilibrium) model. The results show that: (1) carbon tax has a time effect, specifically, the short-term effect is better than the long-term. (2) If the incremental rate of carbon tax is carried out alone, it will exert a great influence on the macroeconomy as well as on most of the agricultural related sectors. (3) If a carbon tax is introduced at the same time as indirect taxes are cut (proportionally), the policy will exert a negative impact on agriculture-related sectors that are subsidized. However, the policy will have a positive impact on those nonsubsidized sectors. Finally, based on the results, we put forward some suggestions that are more suitable for the introduction of a carbon tax in China’s agricultural-related sectors.

Despite the significant impacts of technology on the socioeconomic effects of climate policies, many previous researchers neglected the induced technical impacts and thus resulted in biased evaluations of climate policies. Hence, it is important that the induced technology should be endogenized in the policy evaluation framework. The purpose of this paper is the quantification of the technical impacts of the Chinese carbon tax using a Computable General Equilibrium (CGE) model. The technical impacts are denoted by the induced technological change (ITC), which is a function of the energy-use efficiency (EUE), energy-production efficiency (EPE), and nonenergy-production efficiency (ENE). The carbon tax will increase the energy cost share because of the internalisation of the abatement costs. This paper empirically shows that the carbon tax will decrease the energy cost share and production efficiency but increase the energy use and nonenergy production efficiency. Under the carbon tax, the ITC will decrease the energy use and production efficiency but increase the nonenergy production efficiency. The ITC will increase the RGDP, decrease the household welfare, and increase the average social cost of carbon (ASCC). This finding implies that the ITC of the carbon tax is biased towards the technical progress of nonenergy sectors; the emission abatement will become costlier under the ITC impacts. Although the quantification method of the technical impacts was from an existing published paper, the CGE analysis of the ITC impacts of the carbon tax in China is original in this paper.

Scenario analysis of the carbon pricing policy in China’s power sector through 2050: Based on an improved CGE model

Carbon neutrality has become one of the main goals of addressing climate change on a global scale. As an economic means in China, a carbon tax can promote the transformation of energy structures and reduce greenhouse gas emissions by imposing a certain fee on carbon dioxide and other greenhouse gas emissions. This paper studies how to carry out the energy transition and realize the sustainable development of the country. This paper establishes a theoretical framework for carbon neutrality, carbon tax policy, and energy transition, and elaborates on the reasons for energy transition, the impact of energy transition on the market, the path to carbon neutrality, and China's carbon tax policy. Evaluate China's energy consumption structure from economic, environmental and policy perspectives. This article found that the biggest impact on China's energy consumption structure is the industrial growth rate, followed by GDP, and then carbon dioxide emissions. In order to achieve the long-term goal of global carbon neutrality, the government needs to introduce relevant policies.

Carbon taxes and carbon markets both contribute to mitigating carbon emissions in China’s power industry. Nevertheless, the pricing mechanism within China’s national carbon market, confined solely to the power sector, faces challenges in accurately reflecting the diverse costs of emission-reduction efforts across various regions. Similarly, carbon taxes encounter difficulties in effectively harnessing the inherent emission-reduction capabilities of power enterprises. This study investigates which carbon-pricing mechanism—a carbon tax or the carbon market—can better promote carbon neutrality in China’s coal-based electricity industry. Using a stochastic electricity price model, we reveal the price shocks of both a carbon tax and the carbon market under different carbon-pricing goals. Taking the China Carbon Emission Trading Market as the research object, the results are as follows: First, both carbon tax and the carbon market could significantly trigger price volatility in the coal-based electricity industry, while the carbon market’s shock effect on the industry’s emissions is more significant than that of carbon tax. Second, through both carbon-pricing mechanisms, emissions could be reduced by as much as 20%—a key premise of achieving this goal is keeping the carbon price at the level of 100 yuan/ton. Third, the volatility range of the electricity price, which is policy based, does not manifest the incentivizing effect of economic instruments on emission reduction in the coal-based electricity industry. Policy allows for an upper limit of 15% in the floating electricity price. By clarifying the linkage between carbon-pricing tools and coal-based electricity costs, this study contributes to developing a carbon-pricing mechanism that could help China’s coal-based electricity industry achieve carbon neutrality in a timely manner.

Purpose As climate challenges grow and countries set increasingly ambitious climate goals, the drive to find effective policy tools to address these issues is accelerating. This research aims to describe how the carbon tax and its impacts reduce carbon emissions. Design/methodology/approach This study employs bibliometric analysis to identify research trends and a systematic literature review to offer insights into how carbon taxes, as policy measures, can help reduce carbon emissions. It sourced relevant articles from Scopus databases using a range of keywords and keyword combinations. Findings The findings of this study indicate that the carbon tax is just one of many variables that can reduce carbon emissions. Its effectiveness varies by market maturity, with reductions of 5–21% in established markets. The best results come from hybrid approaches that use both carbon taxes and emission trading systems. When combined with carbon capture, utilization and storage technologies, these approaches could lead to a 32.5% reduction by 2060. Research limitations/implications Practically, policymakers should consider the effectiveness of the carbon tax (policy) in reducing carbon emissions. The study theoretical implications include highlighting various theories for future research and sharing the mapping variables related to organizations’ carbon emission reduction. Originality/value The study adds originality and value to the existing literature by establishing a connection between carbon taxes and carbon emissions. To the best of the authors’ knowledge, this study is the first research that combines bibliometric analysis with systematic literature review to answer how carbon tax and its impacts reduce carbon emissions.