The Effect of Carbon Emission Taxes on Environmental and Economic Systems

Abstract

Carbon dioxide is believed widely to be the major contributor to global warming. Policymakers worldwide are turning to tax policies in an effort to abate carbon emissions. China is the largest emitter of carbon emissions on our planet. The central government, as well as the local official, has introduced a series of environmental regulations, such as environmental protection tax and emissions trading system, to reduce carbon emissions and improve environmental quality. In the near future, the carbon emission tax is also expected to be implemented by the Chinese government. In order to analyze and predict the effect of the carbon emission tax on environmental and economic systems, we developed a four department dynamic stochastic general equilibrium model, which includes households, enterprises, the government, and the environment. The dynamic parameters were obtained using maximum likelihood estimation. In the comparative static-s analysis, we found that after the introduction of carbon emission tax, the level in environmental quality was substantially improved, whereas most economic variables were significantly reduced. Moreover, we used impulse responses functions to evaluate how one shock to the carbon emission tax affects the steady static values for these endogenous variables in our model. We found that the carbon emission tax shock has an instantaneous effect on the majority of economic variables, but it does not affect the environmental quality immediately. In addition, we tested the Porter hypothesis and found no evidence suggesting the statement regarding this hypothesis. Finally, we applied Bayesian estimation to assure our findings in this study, again.

The effects of energy taxes level on greenhouse gas emissions in the environmental policy measures framework

“…Our results are confirmed by other studies (Dietz and Rosa, 1997;Ghazouani et al, 2020;Zioło et al, 2020;Adebayo et al, 2021;Andrew Mejia, 2021;D'Orazio and Dirks, 2022;Tu et al, 2022), in the sense that an increase in energy taxes and imports leads to a decrease in greenhouse gas emissions (GHG), while an increase in GDP has a negative effect on the quality of the environment. On the other hand, in the long run, the same cannot be said about population density and increasing exports, in the sense that an increase in them leads to a decrease in greenhouse gas emissions and not to an increase in them, as we would have expected.…”

“…Thus, policy formulations should focus on removing barriers to the development of digital finance. Because global carbon is considered to be the main contributor to global warming, global policymakers are pursuing a series of fiscal policies to reduce carbon emissions (Tu et al, 2022). The largest carbon emitter on our planet is China, which is why the government has introduced a number of environmental regulations.…”

The impact of environmental taxes on economic benefits and technology innovation input of heavily polluting industries in China

“…They also demonstrated that environmental taxes did not have a "double dividend" effect. Zhu et al (2020a) reported that a carbon tax negatively impacted the economy, with the potential to slow economic growth in particular (Tu et al, 2022). Combined, these findings underscore the uncertainty of whether environmental taxes can bring into full play the benefits of economic growth and technological innovation investment in China.…”

The synergistic effect of carbon performance and technological innovation on corporate financial performance

“…According to the traditional concept, enterprises have born the extra cost of carbon emissions, which is not conducive to the improvement of enterprise performance ( Shukla et al, 2008 ; Zhu et al, 2020a ). Carbon emission taxes is not helpful to economic growing ( Tu et al, 2022 ). So that they are reluctant to engage in carbon reduction activities.…”