The general equilibrium impacts of carbon tax policy in China: A multi-model comparison

We conduct a multi-model comparison of a carbon tax policy in China to examine how different models simulate the impacts in both near-term 2020, medium-term 2030, and distant future 2050. Though Top-down computable general equilibrium (CGE) models have been applied frequently on climate or other environmental/energy pol-icies to assess emission reduction, energy use and economy-wide general equilibrium outcomes in China, the re-sults often vary greatly across models, making it challenging to derive policies. We compare 8 China CGE models with different characteristics to examine how they estimate the effects of a plausible range of carbon tax scenar-ios - low, medium and high carbon taxes.. To make them comparable we impose the same population growth, the same GDP growth path and world energy price shocks. We find that the 2030 NDC target for China are easily met in all models, but the 2060 carbon neutrality goal cannot be achieved even with our highest carbon tax rates. Through this carbon tax comparison, we find all 8 CGE models differ substantially in terms of impacts on the macroeconomy, aggregate prices, energy use and carbon reductions, as well as industry level output and price effects. We discuss the reasons for the divergent simulation results including differences in model structure, sub-stitution parameters, baseline renewable penetration and methods of revenue recycling. (c) 2021 Elsevier B.V. All rights reserved.

Automated summary

We conducted a multi-model comparison of a carbon tax policy in China, finding that while the 2030 NDC target can easily be met in all models, the 2060 carbon neutrality goal cannot be achieved even with the highest carbon tax rates. The 8 CGE models differed substantially in terms of impacts on the macroeconomy, aggregate prices, energy use, carbon reductions, industry level output, and price effects.