Macro and Structural Effects of Carbon Tax in China Based on the ECGE Model

Rapid economic development has brought great pressure to China. Carbon tax could be an ideal economic tool to cope with the environmental pressure. The implementation of carbon tax will exert an influence on the national and sectoral economies as well as reduction. However, few researchers have focused on the carbon tax effect at the sectoral level. Based on SAM 2012, this study develops an ECGE model consisting of the environment module. Then the macro and structural effects of carbon tax are simulated at tax rates of 10-100 yuan/t CO2 in China. Simulation results show that compared with the baseline: 1) Carbon tax has a mild strike on the GDP of China and is effective at reducing emissions. Furthermore, we found that a carbon tax rate of 70 yuan/t CO2 may be an appropriate rate to achieve the Chinese reduction target of carbon intensity in the year 2020. 2) Carbon tax induces an output shrinkage in energy or high-energy-consuming industries by 0.95-7.65%, while there is a slight increase in low-energy-consuming industries. The mining and washing of coal industry (coal) experiences the largest decrease in CO2 emissions and the light industry (lindus) experiences the sharpest decline in carbon intensity.