General Equilibrium Analysis Of Carbon Tax Under Different Tax Return Mechanisms

As global warming trend intensifies, mitigation and adaptation to climate changehave become hot topics of world’s political, economic, diplomatic, energy,environment and other areas. Carbon tax is generally considered to be one of the mostefficient economic means to reduce carbon emissions. At present, Finland, Norwayand other countries have introduced carbon tax and achieved good results. There arealso many scholars in China did some study on carbon tax. Their studies have shownthat, in the near future in China, the introduction of carbon tax is a feasible option.But many studies by scholars both at home and abroad have shown that carbon taxescan achieve the target of emission reduction, but will bring considerable losses toeconomic growth at the same time. Therefore, measures should be taken to reduce thisloss. One of the most common approach is to introduce a carbon tax while reducingother taxes (such as personal income tax, labor taxes, etc.), enabling the total tax levelremain basically unchanged, that is, to maintain the principle of tax neutrality.Therefore, this paper, based on studies of domestic and foreign scholars, analyzesdifferent ways of recycling carbon tax revenue and their economic effect.Based on Computable general equilibrium model, this paper, adopting theprogressive carbon tax in production process, setting four scenarios which includeunreturned carbon tax, using carbon tax income to cut factor income tax, using carbontax income to cut individual consumption tax, using carbon tax to cut corporationconsumption tax, this paper analyses the abatement effect of carbon tax and itsimpacts on macroeconomy and industry outputs. Simulation results show thatadopting the tax neutrality principle, which means using carbon tax income to cutother kinds of tax to maintain the same amount of tax income, will do less harm toeconomy than simply keeping carbon tax income as general government revenue;From the perspective of carbon abatement, no tax return will be the best choice;Taking both the economy impacts and carbon emission reduction effect into account,using the carbon tax income to cut the corporate consumption tax is the optimaltax refund mechanism. Energy industries and energy-intensive industries will suffersignificantly from carbon tax while labor-intensive and low-energy industries willbenefit from carbon tax. If the appropriate way to introduce a carbon tax and taxreturn is adopted, from the long term, the introduction of carbon tax can not only play a role in energy conservation, but also help the transformation of economicdevelopment approach without doing harm to economic development, promote thedevelopment of new energy industries.