Economic impact analysis on China’s environmental tax reform through a static computable general equilibrium analysis
Relative shortage of resources and limited environmental capacity have become the new basic characteristics of China’s national conditions, whereas China’s economic aggregate would continue to expand and the resources environment pressure would continue to increase.
The imposition of environmental tax is one of the effective environmental economic means to promote China’s energy conservation and emission reduction and the transition of development mode.
In this study, the GREAT-W model is further extended into the GeneRal Equilibrium Analysis sysTem for Environment (GREAT-E) to assess the economic impacts of China’s environmental taxation reforming. The simulation results show that the imposition of environmental tax is of very limited impact on China’s macro-economy, in which the reduction in GDP can be made within the affordable range.
Relatively, the emission reduction effect of the imposition of environmental tax on the pollutants is much greater than its negative effect on the economic development. It suggests that imposing environmental taxes can lead to important shifts in production, consumption, value added, and trade patterns. In order to promote the internalisation of environmental cost, it is suggested to raise the pollution tax/charge standard, and at the same time, the government should reduce the adverse impact in the imposition of environmental tax by such means as to relieve the income tax or to provide subsidies to the vulnerable groups.