Environmental and economic impact analysis of levying VOCs environmental protection tax in China

Abstract

China is one of the largest volatile organic compounds (VOCs) emitters worldwide. The emission levels of and harm caused by VOCs have attracted much attention. China has implemented multiple policies for VOCs prevention and control but lacks economic control measures for VOCs In this study, the input-output (IO) price model was used to simulate and analyze the emission reduction and economic effects resulting from the imposition of a VOCs environmental protection tax (EPT) in 31 provinces in China. The results show that, first, the collection of a VOCs-EPT can achieve not only VOCs emission reductions but also the synergistic emission reductions of other major pollutants. Second, the collection of a VOCs-EPT could have a negative impact on the macroeconomy, i.e., the greater the tax scope and the higher the tax rate are, the greater the negative economic impact. Third, differences in the level of economic development, the structure of pollution emissions and the stringency of tax policies among regions would cause the emission reduction effect and related negative economic impact to vary across regions. Finally, the collection of a VOCs-EPT could have heterogeneous impacts on various industries, as high-emission industries would suffer greater negative impacts. Therefore, each region should set tax rates that match its provincial economic and environmental development levels. Furthermore, a VOCs-EPT can be levied on key industries, and reasonable preferential tax policies can be formulated to reduce negative macroeconomic benefits.