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A cost–benefit analysis of the environmental taxation policy in China: A frontier analysis‐based environmentally extended input–output optimization method
Author(s) -
Wang Ke,
Wang Jiayu,
Hubacek Klaus,
Mi Zhifu,
Wei YiMing
Publication year - 2020
Publication title -
journal of industrial ecology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.377
H-Index - 102
eISSN - 1530-9290
pISSN - 1088-1980
DOI - 10.1111/jiec.12947
Subject(s) - economics , natural resource economics , soot , shadow price , environmental pollution , environmental economics , environmental science , environmental protection , mathematical optimization , chemistry , mathematics , organic chemistry , combustion
China's high‐speed economic development and reliance on overconsumption of natural resources have led to serious environmental pollution. Environmental taxation is seen as an effective economic tool to help mitigate air pollution. In order to assess the effects of different scenarios of environmental taxation policies, we propose a frontier‐based environmentally extended input–output optimization model with explicit emission abatement sectors to reflect the inputs and benefits of abatement. Frontier analysis ensures policy scenarios are assessed under the same technical efficiency benchmark, while input–output analysis depicts the wide range of economic transactions among sectors of an economy. Four scenarios are considered in this study, which are increasing specific tax rates of SO 2 , NO x , and soot and dust separately and increasing all three tax rates simultaneously. Our estimation results show that: raising tax rates of SO 2 , NO x , and soot and dust simultaneously would have the highest emission reduction effects, with the SO 2 tax rate making the greatest contribution to emission reduction. Raising the soot and dust tax rate is the most environmentally friendly strategy due to its highest abatement to welfare through avoided health costs. The combination of frontier analysis and input–output analysis provides policy makers a comprehensive and sectoral approach to assess costs and benefits of environmental taxation.