A factorial CGE model for analyzing the impacts of stepped carbon tax on Chinese economy and carbon emission

Carbon tax is a powerful incentive to mitigate carbon emissions and promote energy revolutions. It is of vital importance to systematically explore and examine the socio-economic impacts of levying a carbon tax, such that desired compromises among socio-economic and environmental objectives can be identified. In order to fill the research gap on the stepped carbon tax, this study is to develop a factorial computable general equilibrium (FCGE) model for examining the interactive effects of multiple policy options (e.g., grouping of emission intensity/level, and relevant tax rates), and supporting the formulation of desired carbon-mitigation policies. It is discovered that (1) carbon tax of 18.37 to 38.25 Yuan/ton is a reasonable policy alternative for China; (2) the stepped carbon tax (high level on coal-related fuels) is more efficiency than conventional carbon tax policy; (3) the positive effects for reducing carbon emission intensity can be strengthened with an increasing step range; (4) interactive effects between stepped carbon taxes on coal-related energies and crude oil related energies should be jointly considered by the policy makers. (C) 2020 Elsevier B.V. All rights reserved.

Automated summary

This study found that a carbon tax of 18.37 to 38.25 Yuan/ton is a reasonable policy alternative for China, and that stepped carbon tax is more effective than conventional carbon tax policy. The positive effects on reducing carbon emission intensity can be strengthened by increasing the step range.