Greener economic development via carbon taxation scheme optimization

Reducing carbon emissions is part of an international agreement to alleviate the negative effects of climate change, and a carbon tax is a widely used measure to decrease carbon intensity. A carbon tax's impacts on economic development and carbon emissions reduction vary among sectors, and differentiated carbon tax rates across sectors may offer better potential for balancing the two objectives. However, seldom has any research proposed differentiated carbon tax rates. In this study, a carbon tax rate optimization method based on the computable general equilibrium (CGE) model is proposed, to more effectively control carbon emissions and reduce carbon intensity. Two alternative models are proposed: maximizing GDP and minimizing carbon emissions. China is adopted as a study case to demonstrate the method. The results show that an optimized taxation scheme is more effective in reducing the carbon intensity, and additional CO2 can be reduced without additional GDP decline. Besides, the optimized taxation scheme could lead to greener energy structure. (C) 2020 Elsevier Ltd. All rights reserved.