What kind of environmental fiscal and taxation policies can support green production of ionic rare earths? A computable general equilibrium analysis

Abstract

The Government of China has issued numerous environmental fiscal and taxation policies to promote the green production of ionic rare earths in mining and smelting processes, but the environmental situation near mining areas is still not auspicious. This study constructs a computable general equilibrium (CGE) model focusing on subsidies for cleaner production technology and environmental taxes for pollution among all current environmental fiscal and taxation policies. The objective of this paper is to evaluate and compare macroeconomic, environmental and industrial outcomes under twelve different scenarios to help the government choose the optimal policies. The results show that increasing the subsidy rate for cleaner production technology and increasing the environmental tax levy can both effectively reduce emissions but that increasing the environmental tax rate would have a negative impact on the macroeconomy and ionic rare earth production. If the subsidy rate and environmental tax levy are both raised to a certain level simultaneously, it would positively impact the macroeconomy, the environment and the production of ionic rare earths at the same time. Therefore, the Government of China should adjust the intensity of environmental fiscal and taxation policies for ionic rare earth mining and smelting and adopt a more appropriate policy combination to achieve optimal results at the comprehensive level.