How to set the proper level of carbon tax in the context of Chinese construction sector? A CGE analysis

Abstract

Abstract Under global warming and severe environmental problems, the Paris Agreement urges China to accelerate the pace of the low-carbon economy. Improving the energy efficiency of the construction sector may be an important way to reduce CO2 emissions. As a reasonable energy policy instrument, a carbon tax can effectively improve energy efficiency and reduce CO2 emissions. In this study, a dynamic computable general equilibrium model is developed to explore the possible impacts of different carbon tax conditions on the energy consumption of the construction sector and the macroeconomy of China. Results show that the appropriate carbon tax is 60 RMB/t, which cannot only achieve the emission reduction target but also minimize the negative impact on the macroeconomy. However, the proper level of the carbon tax varies by building stage. Under the proper carbon tax level, the peak of carbon emissions could be reached in 2025. The main purpose of this paper is to provide a theoretical basis for the government in formulating different energy policies.