Analysis of spatial effects of environmental taxes on water pollution in China’s Taihu Basin

Abstract

We create a comprehensive policy evaluation system that is based on the concept of integrated basin management. From the point of view of economic development and environmental protection, we set up an equilibrium environmental tax, optimize its allocation and simulate its effects on reducing water pollution. The approach is demonstrated on the case of the Lake Taihu, China, Basin. Several important conclusions are derived from the findings of this study. First, the comprehensive evaluation system used in this study has great applicability. We calculate equilibrium environmental taxes of 6.83 yuan/kg of chemical oxygen demand (COD) by simulation analysis and estimate that the total cumulative environmental tax revenues would be approximately 55 billion yuan. Second, by integrated watershed management modeling, resources can be optimized, and problems of uneven distribution of resources in the region can be resolved. Third, compared with non-adopted environmental tax, an environmental tax policy can exceed reduction targets of 4%. At the same time, it can increase revenue by 0.88 trillion yuan and the Environmental Efficiency Improvement Index (EEII) by three points. Fourth, priorities of environmental governance are the areas of Zhihugang, Nanxi, Tiaoxi, Wujin and East Taihu. Fifth, a single environmental tax rate is likely to cause over- or under-assessment of environmental tax revenue in the long-term. As shown in this study, this problem can be prevented by using the accumulation of countermeasure fees.