Reduction of CO2 Emissions in China: Analysis of the Impact of the Carbon Tax on Chinese Economy

Abstract

Carbon emission reduction is one of the primary targets for the Chinese economy, and a carbon tax has been proven, by many nations, to be an intuitive and effective strategy to mitigate carbon emissions. In this paper, we examine the effect of a potential carbon tax on economy and carbon emissions with a static CGE model, using 2012 Chinese macroeconomic data. The distribution of energy input among production sectors is also analyzed. The simulation results show that a carbon tax causes all the production sectors to reduce their carbon emissions for a considerable amount, especially for manufacturing industry, and coal industry; on the other hand, it only causes small losses in GDP. Generally speaking, the imposition of a carbon tax is beneficial to Chinese economy.