The Impact of Energy Tax on Carbon Emission Mitigation: An Integrated Analysis Using CGE and SDA

Abstract

By originally integrating the structural decomposition analysis (SDA) into a computable general equilibrium (CGE) model, this paper simulates and analyzes the impact and mechanism of energy taxes on carbon emissions. Changes in carbon dioxide emissions, energy consumption structure, and other macroeconomic variables are investigated under different pre-set scenarios. The conclusion shows that the imposition of an ad valorem energy tax will indeed impact the production and consumption of enterprises. A higher tax rate leads to more pronounced reductions in carbon dioxide emissions. The carbon intensity effect is the dominant factor driving national carbon emissions and carbon emission intensity decline. Although the production structure effect and final demand effect play a role, their influences are relatively weak. While levying energy taxes, subsidies for personal income tax or corporate production tax can achieve double dividends. The progress of energy utilization technology is capable of increasing unit energy output and easing the negative impact of energy tax collection, and the gross national product may rise rather than fall. Under this circumstance, the production structure effect will play a greater role because the total demand coefficients of various industries for energy industry products will further decline. Only by levying energy taxes on coal and oil, exempting energy taxes on natural gas, or using energy tax revenue to subsidize investment in the natural gas industry can the government optimize the energy consumption structure. Subsidies will boost final demand for the natural gas mining and processing industry and increase the consumption share of natural gas, a cleaner energy source than coal and oil, which is critical in the current energy transition process.