Optimal carbon taxes in carbon-constrained China: A logistic-induced energy economic hybrid model

Abstract

Carbon tax is an effective option for internalizing climate change and correcting market failure, an optimal set of carbon taxes can result in superior carbon mitigation. Then what is the optimal trajectory of carbon tax under various carbon-constrained scenarios, and what are the impacts of carbon controls on the economy and performance of carbon-free technologies are important questions to be addressed. We construct an energy–economy–environment aggregated model of China, combining top–down and bottom–up modeling and introducing revised logistic curves for enriching technical details. We also propose four carbon-constrained scenarios based on representative international carbon allocation plans. Our analysis shows that the optimal carbon tax in China is a monotonically increasing one, following a classical, S-shaped pattern. Carbon space constraints play an important role in promoting development of carbon-free technologies, while the substantial transition from fossil fuels to non-carbon energy would not happen before 2040, making clear that it will take at least 30 years to promote the development of carbon-free technologies. However, present energy-saving and efficiency-improving measures ensure that China is capable of achieving the voluntary goal of reducing carbon intensity in 2020 by 40–45% of what they were in 2005; nevertheless, introducing some carbon controls is necessary to fulfill the task of carbon emissions reduction in the Chinese Twelfth Five-Year Plan.