The Urbanisation Impacts on the Policy Effects of the Carbon Tax in China

In the literature, very few studies have focused on how urbanisation will influence the policy effects of a climate policy even though urbanisation does have profound socioeconomic impacts. This paper has explored the interrelations among the urbanisation, carbon emissions, GDP, and energy consumption in China using the autoregressive distributed lag (ARDL) model. Then, the unit urbanisation impacts are inputted into the policy evaluation framework of the Computable General Equilibrium (CGE) model in 2015-2030. The results show that the urbanisation had a positive impact on the GDP but a negative impact on the carbon emissions in 1980-2014. These impacts were statistically significant, but its impact on the energy consumption was not statistically significant. In 2015-2030, the urbanisation will have negative impacts on the carbon emissions and intensity. It will decrease the GDP and the household welfare under the carbon tax. The urbanisation will increase the average social cost of carbon (ASCC). Hence, the urbanisation will reinforce the policy effects of the carbon tax on the emissions and welfare.