The Impacts of Carbon Tax on CO2 Emissions and Macroeconomics in China

Abstract

This paper takes an individual provincial administrative region as the research object. The difference of regional emission reduction effect and its economic impact under different environmental tax rate are studied. At the tax rate of 20 yuan/ton CO2, the emissions of CO2 decreased by 3.57%. Inevitably the carbon tax has a negative shock on some economic variables. For example, the loss of GDP at the tax rate of 20 yuan/ton CO2 is 0.57%. Whether the negative impact of the carbon tax can be offset or be relieved? The scenario of the tax refund is simulated. The results indicate that tax refund can relieve the adverse impacts on the economy. Nonetheless, the effect of emission reduction is also impacted.