Effects of an Energy Tax (Carbon Tax) on Energy Saving and Emission Reduction in Guangdong Province-Based on a CGE Model

Guangdong, as China’s most affluent province, which is representative in terms of its industrial and energy consumption structure, will deal with an important issue about how to change its environmental management policies from command-and-control strategies to incentive-based ones and how to exert its effects to the greatest extent possible in the new situation of the impending imposition of an environmental tax. By establishing an energy Computable General Equilibrium (CGE) model for Guangdong Province, and setting up various taxation and tax refund scenarios, this research simulates the energy saving and emission reduction effects imposed by the imposition of an energy tax or carbon tax at various tax rates in Guangdong Province, and analyzes the mitigation effects upon an economic system by various tax refund plans. The research proves that when the energy tax rate is at 100–200 yuan/tce (ton coal equivalent) or carbon tax at 50–100 yuan/t CO2, the energy consumption of Guangdong Province is reduced by 5.8–11.21%, and carbon emission is reduced by 5.94–11.61%. The energy saving and emission reduction effects of the carbon tax surpasses that of the energy tax under the equivalent tax revenue with even fewer significant negative impacts upon the economy, contributing to the capital transfer towards non-energy intensive industries; thus, appropriate and accurate tax refund plans can alleviate the negative impacts of taxation upon the economy in Guangdong Province.