Effects of different types of environmental taxes on energy-water nexus

Energy and water are closely related resources, so environmental tax policies for energy resources will also influence the use of water resources. Different environmental tax policies have different emphases. However, few research has compared their effects on the energy-water nexus. In the present study, we considered two commonly used environmental tax policies to regulate energy use (energy and carbon taxes), and established a dynamic computable general equilibrium model to compare the comprehensive impacts of different tax types and intensities on the energy-water nexus. In addition to the direct-use nexus (direct water and energy consumption), we also considered the embodied-use nexus (energy related water consumption and water-related energy consumption) and the hybrid-use nexus (hybrid water and energy consumption). Besides, both the effects of tax rates and time spans are simulated simultaneously. China was adopted as a case study. For the direct-use nexus, both taxes would increase the proportion of direct water consumption versus direct energy consumption. The average differences in the proportion change rates between the two taxes were 3.8, 7.8, and 9.7% for the low, medium, and high tax intensities, respectively. For the embodied-use nexus, the carbon tax could increase the proportion of energy-related water consumption versus water-related energy consumption. The average differences in the proportion change rates between the two taxes were 4.4, 8.4, and 10.2% for the low, medium, and high tax intensities, respectively. For the hybrid-use nexus, the effects of the taxes were similar to those for the direct-use nexus. (c) 2020 Elsevier Ltd. All rights reserved.

Automated summary

This study examined the impacts of energy and carbon taxes on the energy-water nexus. It found that both taxes have significant effects on the proportion of water and energy consumption in direct-use and embodied-use nexus, but similar effects on the hybrid-use nexus.