Air pollutants and carbon emissions are both mainly derived from energy consumption. As important policy instruments for emissions reduction, the relationship between environmental tax (SO2- and NOX- ) and carbon tax (CO2-) calls for more research. This paper compares cost-benefits of environmental tax and carbon tax under same level of GDP loss, carbon emissions reduction and carbon emissions intensity decline. A computable general equilibrium (CGE) model of China with 139 sectors based on 2012 Chinaâ€™s input-output table and statistical data on environment has been developed for this purpose. Simulation results show that current environmental tax in China is effective to reduce emissions (SO2 -1.34%; NOX -1.04%; CO2 -0.71%) with mild impact on GDP (-0.16%). In particular, given a constant GDP effect, current environmental tax equates to a carbon tax of 19 RMB per ton, but carbon tax would be more efficient than environmental tax to reduce CO2 emissions (-0.89%). If given a constant CO2 emission, current environmental tax equates to a carbon tax of 15 RMB per ton, while carbon tax has smaller impact on GDP (-0.12%); however, in terms of air pollutants reduction, carbon tax would be less efficient (SO2 -0.52%; NOX -0.61%). If given a constant carbon emission intensity decline, environmental tax is less cost-benefit than carbon tax. Impact on sector level are also discussed. The study suggests that the â€˜embodiedâ€™ carbon tax in environmental tax policy should be considered if China apply a carbon tax in the future.
Keywords environmental tax, carbon tax, CGE model, cost-benefit