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The Impact of Carbon Tax on Regional Economy and Environment

Author: WeiXiaoZuo
Tutor: HuJianFeng
School: Zhejiang University of Technology
Course: Industrial Economics
Keywords: Carbon Tax Regional CGE Model Economic Development Environmental Quanlity
CLC: F205
Type: Master's thesis
Year: 2011
Downloads: 323
Quote: 1
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Abstract

Climate warming is one of the most concerned environmental problems. To mitigate climate change, many countries launched a wide-ranging discussion and cooperation to find practical solutions. Because of the energy consumption structure and rapid economic development, China has become the world’s largest CO2 emitter. Although the "Kyoto Protocol" is not mandatory in China’s emission reduction obligations, with the increasing trend of global warming, China will face more and more pressure from other countries. Consider this, Chinese government made a national greenhouse gas emissions targets. It will be needed to take a series of measures to achieve this goal, and carbon tax is an important means.At present, the carbon tax has become a hot topic in academia, most of the study in China used the international general analysis model - computable general equilibrium model, and the simulated path - a carbon tax and its impact on GDP and Industries. However, possibly due to data constraints, the majority of existing studies are based on country-level, hardly any researches on the regional level. For China’s actual circumstances, whether the resource endowments or economic structures among provinces are very different, so the simulation results of impact of carbon tax based on the national level may be not clear or accurate. Thus, impact assessment of a carbon tax based on regional-level is essential.This paper uses empirical research methods to analyze the impact of carbon tax on regional economy and environment in Zhejiang Province. Firstly, this article make theoretical analysis of the mechanism of the carbon tax, and then review domestic and international research from the view of economic effects and environmental effects of carbon tax; Subsequently, this article build a regional CGE model which contains six blocks: production block, trading block, income and expenditure block, investment-saving block, environment block and balance block. Finally, this paper analyse the impact of carbon tax on environmental quality and economic development in Zhejiang Province, by means of CGE model and using the data of input-output tables in 2007.The simulation results argue that the implementation of carbon tax has a great effect on the environment and the economy through the price mechanism, mainly in the following respects: (1) in respect of environmental quality impacts , carbon tax will reduce the quantity of CO2 emissions, and the higher tax rate, the more reduction. So carbon tax can mitigate GHG emissions, but the effect is very limited. (2) in respect of macro-economic impacts, carbon tax makes a negative impact on macroeconomic growth of Zhejiang Province, and this negative effect will gradually increase as the tax rate growing, but the simulation results are always less than the ones based on national level; (3) in respect of industry impacts, the impacts of carbon tax on various industries’output, import and export trade, interprovincial trade are different, among which construction industry, heavy industry, power industry are larger affected, agriculture and services industry are less affected; (4) in respect of tax revenue, the increase in carbon tax revenue is more than the decline of income tax and production tax revenues, so government tax revenue is increasing. Finally, based on the above findings of the carbon tax policy, this paper put forward corresponding countermeasures from the view of state and region.

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CLC: > Economic > Economic planning and management > Management of National Economy > Management of resources,environment and ecology
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