Feasibility Study of China’s Carbon Tax System under the Carbon Neutrality Target—Based on the CGE Model

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.

To solve the environmental problems caused by climate change, the Paris Agreement urges China to accelerate the pace of CO2 emission reduction. Carbon trading and carbon tax have been considered the key instruments in reducing CO2 emissions. The focus of this article is not only to examine the impact of carbon trading and the carbon tax policy on China’s macroeconomy but also to study the “carbon trading–carbon tax” mixed policy and make a comparative analysis based on the computable general equilibrium (CGE) model. We found that the mixed policy is more favorable to China’s macroeconomy than a single carbon emission reduction policy and is conducive to improving people’s welfare. If a carbon tax is carried out, a relatively mild and low carbon tax rate should be adopted to achieve China’s carbon emission reduction goal and have a favorable impact on the macroeconomy. The main purpose of this article is to provide a theoretical basis and policy advices for the Chinese government in formulating innovative carbon reduction policies.

Malaysia, as a small and developing country, must reduce carbon emissions because the country is one of the top CO2-emitting countries in the ASEAN region. Therefore, the current study implements two environmental tax policies; carbon and energy taxes, in order to examine the impacts of these policies on the reduction of carbon emission in the whole of the economy by applying a computable general equilibrium model. Since the whole of the government revenue from these tax policies is transferred to all household and labor types through two schemes, a lump sum tax, and a labor tax, respectively, it is assumed that there is revenue neutrality in the model for the government. The findings from simulated scenarios indicate that the carbon tax policy is the more efficient policy for reducing CO2 emission, in both transferring schemes, while its impact on macroeconomic variables is almost lower than the equivalent energy tax. The carbon tax is more effective than the energy tax for Malaysia to achieve 40% carbon reduction target in comparison with its 2005 level. The carbon tax, compared to the energy tax, also leads to more decrease in consumption of fossil fuels. The carbon tax policy, in comparison with the energy tax, due to revenue recycling causes much more increase in the welfare of rural and urban households in Malaysia, especially the welfare of rural (lower income) households.

Using the panel data of Shanghai and Shenzhen A-share listed companies spanning from 2007 to 2021, we explore the impact of the synergism of carbon emission trading policy and carbon tax policy on the carbon emission level of enterprises through the difference-in-difference model, intermediary effect model, regulatory effect model. The research results show that: (1) Carbon emission trading and carbon tax both promote enterprises’ carbon emission reduction. (2) There are three paths for carbon emission trading and carbon tax policies to encourage enterprises’ carbon emission reduction actions synergistically: improving enterprises’ green technology innovation level, optimising energy structure, and accelerating industrial structure optimisation. (3) Mediated regulatory effect results show that the greater the company’s government support and R&D investment, the greater the synergism between carbon trading and carbon tax policies to drive green technology innovation and the better the carbon emission reduction effect of the company. (4) The synergism between carbon trading and carbon tax policies positively fosters public ownership companies’ carbon emissions reductions and heavily polluted industry companies.

In this paper, we focus on China's power sector to investigate ways to improve emissions reductions in the context of global warming and rising carbon emissions. This paper reviews the current state of adapted carbon emission reduction policies in China's power industry and assesses the potential effectiveness of two mechanisms, carbon taxation, and carbon trading, in achieving substantial emissions reductions. China's power sector is a major contributor to global carbon emissions, and the paper explores the balance between short-term carbon tax policies and long-term carbon trading strategies aimed at promoting an early peak in carbon emissions as well as carbon neutrality within the country. This research finds that the carbon tax can have positive impacts in the short term, whereas carbon trading exhibits higher efficiency in the long term. The paper addresses this by proposing a combination of the two mechanisms to achieve effective emissions reductions in the power industry, supporting China's goal of achieving carbon neutrality by the time of 2060. Finally, we explore the feasibility and benefits of implementing a carbon tax, highlighting its suitability for near-term implementation in the power industry. We conclude that a combination of carbon taxes and carbon trading can make a significant contribution to China's carbon peak and carbon neutrality targets.

Carbon emissions from the refining industry are receiving increasing national attention. In view of long-term sustainable development, a carbon pricing mechanism oriented to carbon emission reduction needs to be developed. Currently, the two most common carbon pricing instruments are emission trading system and carbon tax. Therefore, it is important to study the carbon emission problems in the refining industry under emission trading system or carbon tax. Based on the current situation of China's refining industry, this paper constructs an evolutionary game model for backward and advanced refineries to explore which instrument is more effectively applied in the refining industry and identify the effective factors that can promote carbon emission reduction in refineries. According to the numerical results, if the heterogeneity of enterprises is small, the government's implementation of an emission trading system is the most effective measure, while carbon tax can only ensure that the equilibrium strategy solution is (1,1) when the tax rate is high. If the heterogeneity is large, the carbon tax policy will not have any effect, indicating that government implementation of an emission trading system is more effective than the carbon tax. In addition, there is a positive relationship between carbon price, carbon tax, and refineries' agreement to carbon emission reduction. Finally, consumers' preference for low-carbon products, R&D investment level, and R&D spillover effect have nothing to do with carbon emission reduction. Only by reducing refinery heterogeneity and improving the R&D efficiency of backward refineries can all enterprises agree to carbon emission reduction.

Carbon tax and low-carbon credit: Which policy is more beneficial to the capital-constrained manufacturer's remanufacturing activities?

Impact of energy structure on carbon emission and economy of China in the scenario of carbon taxation

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.

How would the carbon tax on energy commodities affect consumer welfare? Evidence from China's household energy consumption system.

Sustainable biofuel consumption in air passenger transport driven by carbon-tax policy

Carbon tax represents governments’ approach to steering the economy towards a greener future. Our research question focuses on the impact of carbon tax policy on a firm’s production decision and revenue and on total social welfare. In particular, we assume that a firm’s decision is subject to its behavioural considerations or, in other words, its risk attitude. We model a government plan to charge a carbon tax, and a risk-averse (or risk-neutral) firm needs to plan its production and estimate its profit if the carbon tax policy is implemented. We show that it is possible for a risk-averse firm’s optimal profit, in some cases, to be higher than that of a risk-neutral firm when facing a carbon tax. This implies that the risk-averse attitude is not necessarily harmful to the firm’s profit. For operations management scholars, our model highlights the importance of integrating firms’ behavioural responses into the carbon tax price. Our model suggests that for governments to implement carbon tax policy effectively, they should make carbon prices vary under certain conditions and not worry about price variation antagonising firms at large.

Japan's carbon tax policy: Limitations and policy suggestions.

With the increasing global concern over climate change, reducing greenhouse gas emissions has become a universal goal for governments and enterprises. For oversize and heavyweight cargo (OHC) transportation, multimodal transportation has become widely adopted. However, this mode inevitably generates carbon emissions, making research into effective emission reduction strategies essential for achieving low-carbon economic development. This study investigates the optimization of multimodal transportation paths for OHC (OMTP-OHC), considering various direct carbon pricing policies and develops models for these paths under the ordinary scenario—defined as scenarios without any carbon pricing policies—and two carbon pricing policy scenarios, namely the emission trading scheme (ETS) policy and the carbon tax policy, to identify the most cost-effective solutions. An enhanced genetic algorithm incorporating elite strategy and catastrophe theory is employed to solve the models under the three scenarios. Subsequently, we examine the impact of ETS policy price fluctuations, carbon quota factors, and different carbon tax levels on decision-making through a case study, confirming the feasibility of the proposed model and algorithm. The findings indicate that the proposed algorithm effectively addresses this problem. Moreover, the algorithm demonstrates a small impact of ETS policy price fluctuations on outcomes and a slightly low sensitivity to carbon quota factors. This may be attributed to the relatively low ETS policy prices and the characteristics of OHC, where transportation and modification costs are significantly higher than carbon emission costs. Additionally, a comparative analysis of the two carbon pricing policies demonstrates the varying intensities of emission reductions in multimodal transportation, with the ranking of carbon emission reduction intensity as follows: upper-intermediate level of carbon tax > intermediate level of carbon tax > lower-intermediate level of carbon tax = ETS policy > the ordinary scenario. The emission reduction at the lower-intermediate carbon tax level (USD 8.40/t) matches that of the ETS policy at 30%, with a 49.59% greater reduction at the intermediate level (USD 50.48/t) compared to the ordinary scenario, and a 70.07% reduction at the upper-intermediate level (USD 91.14/t). The model and algorithm proposed in this study can provide scientific and technical support to realize the low-carbonization of the multimodal transportation for OHC. The findings of this study also provide scientific evidence for understanding the situation of multimodal transportation for OHC under China’s ETS policy and its performance under different carbon tax levels in China and other regions. This also contributes to achieving the goal of low-carbon economic development.

An evolutionary game analysis of new energy vehicles promotion considering carbon tax in post-subsidy era