The energy, environment and economy impact of coal resource tax, renewable investment, and total factor productivity growth

Abstract

China is the biggest emitter in the world, and coal is dominant in China's energy structure. At present, China has used many strategies to reduce coal use, but their cost-effectiveness is controversial. This paper applies the China-Energy-Environment-Economy Analysis (CEEEA) model, a dynamic recursive computable general equilibrium model with multi-sectors and multi-residents, to simulate progressive policy mix to reduce coal consumption and CO2 emission during 2020–2030, and presents the impact on energy, environment, and economy. The results show that the coal resource tax and the renewable investment can significantly reduce coal share and CO2 emissions to different degrees. The producer price index increases a lot in coal-related industries. However, the consumer price index only increases by no more than 1%. After all, energy products account for a small proportion of the supply chain of bulk commodities. Another, this paper tests the boundary of Porter Hypothesis of such policy mix: it only requires an additional 0.09% increase of total factor productivity every year to cover the negative economic impact of the taxes.