Emission Subsidies Research Articles

Impact of carbon fiscal policy on Zhejiang Economy—Evidence from E-DSGE

This paper studies the impact of carbon fiscal policy on the Zhejiang economy through the lens of a DSGE model with an environmental sector. The model was estimated via Bayesian estimation using data from Zhejiang Province for the period from 2005Q1 to 2021Q4. We found that both carbon tax and carbon emission subsidy can improve environmental quality and reduce carbon emissions. However, the subsidy tends to stimulate output and employment more, while both policies have a negative impact on consumption and investment. We suggest that the government should exercise caution in implementing these policies, as their scale of impact is relatively small. The combination of the two policies could neutralize their impact on output but may enhance their impact on other sectors in Zhejiang. However, the structure and timing of these policies matter; implementing a low carbon tax first followed by a high carbon subsidy would be preferable. Furthermore, we examined and concluded that emission technology, particularly at the firm level, can play a significant role in mitigating the negative impact.

Analysis of the economic impact of preventing air pollution based on a computable general equilibrium model

ABSTRACT This paper reports an analysis using the computable general equilibrium (CGE) model to calculate the economic development and emissions under different air pollution prevention strategies, with a focus on the Beijing-Tianjin-Hebei rim surrounding the cities in the ‘Capital Economic Circle’. It appeared that raising the emission tax effectively suppressed air pollution but also suppressed economic development. Raising the emission subsidy promoted economic development, but did not suppress air pollution. A stepwise tax collection mode can be used to formulate the emission tax. When using emission subsidies to encourage manufacturers to improve their exhaust treatment technology, the policy should be tilted towards small enterprises to reduce economic pressure on them.

Sustainable Development Economic Strategy Model for Reducing Carbon Emission by Using Real Options Approach

This paper is aimed at the call of the United Nations Intergovernmental Panel on Climate Change (IPCC) for the need to maintain global warming within a controllable range. The goal is to target carbon emissions to achieve “net-zero” emissions, along with constructing a green energy investment strategy model for firms in response to government’s environmental protection policies. The paper uses the real options approach of dynamic investment decision to construct an investment decision model. Considerations include government taxation of carbon emissions, subsidies to reduce carbon emission policies, and incentives for firms to renew their investments in green energy equipment. Assuming that there is uncertainty in government carbon emission taxes and a reduction of carbon emission subsidies, the changes follow the joint geometric Brownian movement. We used this model to solve the optimum of the threshold for carbon emission taxes and of carbon emission reduction subsidies ratio. If carbon emission taxes and carbon emission reduction subsidies ratio are higher than the threshold, a firm suspends investment in green energy equipment because government subsidies are insufficient. If carbon emission taxes and the carbon emission reduction-subsidy ratio are less than or equal to the threshold, then a firm is qualified for the government’s subsidies for reducing carbon emissions, and the firm invests in green energy equipment. The results of this study can provide reference for firms to invest in green energy equipment, and for government control of carbon emission policies. This policy can effectively reduce carbon emissions and achieve co-construction, co-governance, and the sharing of innovative social governance patterns. Finally, it can create a win–win situation between the government, firms, and society.

Investment strategy analysis of emission-reduction technology under cost subsidy policy in the carbon trading market

Purpose The authors consider a dynamic emission-reduction technology investment decision-making problem for an emission-dependent dyadic supply chain consists of a manufacturer and a retailer under subsidy policy for carbon emission reduction. The consumers are assumed to prefer to low-carbon products and formulate a supply chain optimal control problem. Design/methodology/approach The authors adopt differential game to analyze investment strategies of cost subsidy coefficient with respect to vertical incentive of a manufacturer and a retailer. A comparison analysis under four different decision-making situations, including decentralized decision-making, centralized decision-making, maximizing social welfare, is obtained. Findings The results show that the economic benefit and environmental pressure have a win–win performance in centralized decision-making. In four different game models, equilibrium strategies, profits and social welfare show changing diversity and have a consistent development trend as time goes on. Research limitations/implications The authors estimate the demand function is a linear function in this paper. According to the consumers’ preference to low-carbon products, consumer’s awareness meets the law of diminishing marginal utility like advertising goodwill accumulation. The carbon-sensitive coefficient might be a quadratic expression, which will complicate the problem and be consistent with reality. Practical implications It captures that there is a necessity to strengthen cooperation and exchange of carbon emission technology among the enterprises by simulation of different decision-makings when government granted cost subsidy. Social implications The results provide significant guidelines for the supply chain to make decision-makings of emission-reduction technology investment and relevant government departments to determine emission subsidies costs. Originality/value An endogenous subsidies coefficient is produced by the social welfare function. Distinguished from previous study, it also considered the influences of carbon emission trade policy and consumer preference.

Do emission subsidies reduce emission? In the context of environmental R&D organization

This paper, which reexamines the Poyago-Theotoky model, provides additional investigation that was conducted under a corrected environmental damage parameter. As new findings, we obtain the following. First, social welfare under a time-consistent emission tax (emission subsidy) policy is always welfare-enhancing rather than the case of laissez-faire. Second, if the environmental damage parameter is sufficiently small, then the equilibrium emission tax rate is invariably negative. It is therefore an emission subsidy. Moreover, total emissions under the emission subsidy scenario become less than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is low. However, total emissions under the emission subsidy become greater than those under laissez-faire if the damage parameter is sufficiently small, and if the R&D cost is high.

Firm incentives to promote technological change in pollution control

The process of technological change in pollution control is broken into three basic steps: innovation, diffusion, and optimal agency response. Firm incentives to promote these steps are then examined under five regulatory regimes: direct controls, emission subsidies, emission taxes, free marketable permits, and auctioned marketable permits. On a relative basis, emission taxes and auctioned permits provide the highest firm incentives to promote technological change; at times, free permits generate lower incentives. Direct controls, which are common regulatory tools, usually provide the lowest relative firm incentives to promote technological change.