Carbon Tax Policy,Optimal Income Redistribution and Low Carbon Economic Transition
Internalizing the externalities of carbon emissions is the core mechanism for achieving carbon neutrality.Market-based environmental policies,such as carbon tax and carbon emissions trading,along with their combinations,can raise the costs of high-carbon activities relative to low-carbon ones,guiding the flow of production factors like capital and labor towards low-carbon sectors.Thus,these policies have become the mainstream pathways for achieving carbon neutrality internationally.This paper constructs a New Keynesian dynamic stochastic general equilibrium(DSGE)model that incorporates emission externalities to study the channels through which carbon tax policy improve the environment and incur economic costs in the long term,as well as optimal policy for redistributing carbon tax revenues and the economic pathways for low-carbon transformation under various policy combinations.The theoretical and numerical analyses reveal that:(1)Carbon tax policy enhances environmental quality through emission reduction effects(reducing emissions),but incur economic costs(decreasing output)due to factor price distortions and labor market effects;(2)Labor tax and consumption tax subsidy policies mitigate the economic costs of carbon tax policy while worsening environmental quality,exhibiting a"double-edged sword"characteristic,whereas emission reduction subsidy policies can improve environmental quality and reduce the economic costs caused by carbon tax policy,making them the optimal long-term redistribution policy;(3)There will be an initial"recession period"during the economic transition to low-carbon,and when carbon tax revenues are redistributed via emission reduction subsidies,this period is the shortest compared to labor tax and consumption tax subsidy policies;(4)In the early stages of the transition,the output and social welfare from labor tax subsidy policies are greater than those from emission reduction subsidy policies,but after ten years of low-carbon transition,both output and social welfare from emission reduction subsidy policies are higher.
Carbon Tax PolicyIncome RedistributionEconomic TransformationDSGE Model
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