In this paper we examine the impacts of carbon tax policy on CO2 mitigation effects and economic growth in China by using a dynamic energy-environment-economy computable general equilibrium (CGE) model. The results show that 30, 60, and 90 RMB per ton CO2 of carbon tax rate will lead to a reduction of CO2 emissions by 4.52%, 8.59%, and 12.26%, as well as a decline in the GDP by 0.11%, 0.25%, and 0.39% in 2020, respectively, if carbon tax revenues are collected by the government. Moreover, with energy efficiency improvements the CO2 emission per unit of GDP will equally drop by 34.79%, 37.49%, and 39.92% in 2020, respectively. Negative impacts on sectors and households will be alleviated if carbon tax revenues are returned to these sectors and households.