Assessment Models For Distributional Impact Of Carbon Pricing Mechanisms And Their Applications

Facing the growing pressure to reduce emissions,the Chinese government has announced a series of voluntary quantitative emission reduction targets,and has also clearly put forward the implementation of carbon pricing mechanism to achieve these targets.However,all reduction measures accompany cost and so does the carbon pricing.A large number of studies have shown that the carbon pricing may have adverse impacts on economic growth and the international competitiveness of industries,and also may lead to regressive distributional effects.Among them,the distributional effect is an important issue which affects the public acceptance of the policy as well as the social equity and justice.As for China,which is experiencing its transition period and meanwhile facing a severe problem of income disparity,it is particularly important and necessary to assess the distributional effect of the carbon pricing policy.Currently,research on evaluating the distributional effect of China's carbon pricing mechanism from multidimensional perspectives is lacking.Therefore,this dissertation focuses on the carbon pricing mechanism and takes the carbon tax policy as an example.Among a series of issues that may arise from the implementation of this policy,this paper pays special attention to its potential distributional effect in China.Through developing and improving the computable general equilibrium model,as well as expanding the application of input-output model,social accounting matrix model,bibliometric analysis and other models and methods,this thesis examines the impact of a carbon tax on China's income distribution pattern from the national,regional and provincial levels,respectively.The conclusions can make a contribution to policy-makers on how to design and implement the policy in order to realize the reduction targets while maintaining emission reductions and minimizing the overall socio-economic impacts.Major contributions of this dissertation are as follows:?1?Given that there is little research focus on the causes of the differences in carbon emissions and carbon burdens between households,this thesis,based on the expanded input-output model and compiling the 2007 social accounting matrix of China,analyzes the differences in emissions among different income groups and further explores its causes.The results show that the rural households account for 29%of national total emissions with a population share of 55%,while urban households generate 71%of the total emissions.Among them,the urban middle and above level income groups contribute to 55%of national total emissions with its population being only 25%.The national average per capita emissions are 4.83 tCO₂,and the figures for the rural and urban households are 2.54 and7.64,respectively,indicating a two-time gap between the rural and urban.There are also big differences in emissions within the urban and rural income groups,showing an overall characteristic that the higher the income level is,the higher the per capita emissions are.Through further eliminating the differences in income level and consumption propensity among different groups,we find that,the higher the income level within the rural,the larger the per capita direct and indirect emissions by consumption,while within the urban,the result is opposite.The reason may be that the higher income groups in rural spend a larger share of their total expenditure on carbon-intensive goods,resulting in their carbon-intensive consumption patterns.That is same to the urban lower income groups.?2?China's current primary distribution pattern is not ideal,facing a high risk to suffer from the impact by a carbon tax.Given that related research is almost blank,this thesis introduces China's labor market characteristics into China Energy&Environmental Policy Analysis?CEEPA?model,and sets three different labor market scenarios,and then estimates the effect of a carbon tax on China's primary distribution pattern from an economy-wide perspective.The results indicate that when all tax revenue is assigned to the government budget,taxing carbon would make the share of labor remuneration in primary distribution even lower,and the value of labor remuneration would also be reduced.Meanwhile,the capital income and its share would also decrease,while the net product tax and its share would increase,indicating that taxing carbon would further deteriorate China's current primary income distribution status and hammer both households and enterprises,while the government would benefit the most.Overall,a low carbon tax rate will not strongly exacerbate the inequity in the primary income distribution but these adverse impacts will enhance with the tax rate.?3?Currently,studies on assessing the distributional impact of a carbon tax among various income groups from both the income and expenditure sides are still lacking.Therefore,this thesis expands the standard rural-urban dimensional CEEPA model into multi-dimensional CEEPA model.By setting and simulating various carbon tax preferential measures,we estimate the distributional impact of carbon tax from both the income and expenditure sides.Through analyzing from a multi-income group dimension,detailed policy suggestions are provided.The results indicate that without any protections for households,given that the current social security system obviously favors urban households,plus the economic growth is mainly driven by investment,a carbon tax will not only widen the income and welfare gap between urban and rural and within urban groups,but will also have negative impact on both urban and rural income groups,though it could have a weak progressive effect within the rural.Therefore,an optimal solution is to use the carbon tax revenue to reduce indirect tax whilst appropriately increasing government transfers to rural households and vulnerable urban groups in proportion to population.By doing so,the distributional deterioration caused by the carbon tax could be effectively mitigated.?4?China has huge regional differences,and so far,the regional distributional impact of carbon pricing has not received much attention.Based on Multi-Regional Input-Output?MRIO?model,and combining with China 2012 MRIO table,this dissertation analyzes the distributional impact of carbon pricing among urban and rural households in 30 provinces,then makes a comparison among and within these provinces,finally provides some regional-level policy implications.The results show that the average per capita carbon payment of a 10 yuan/tCO₂ carbon price is 19.2 yuan and the average carbon burden rate is0.13%,indicating that the additional burden of a low carbon price on residents is not heavy.However,the carbon burden on residents of 30 provinces overall shows a regional regressive distributional effect which means the burden on households of western regions is higher than the eastern regions,and more than half of the 30 provinces show rural-urban regressive results.When dividing these 30 provinces into 8 regions,the carbon pricing will bring a lowest carbon burden to the developed regions like Jing-Jin region,Eastern Coastal and Southern Coastal area;while for the undeveloped regions like Northwest?NW?and Southwest?SW?regions,NW bears the highest burden and the burden on SW is close to the national average level.The Northern Coastal and Central regions also bear a burden rate close to the national average level,while the Northeast region bears the second highest burden,much higher than the national average level.Moreover,the results from the 7representative provinces show that the carbon pricing generally show weakly regressive distributional impact among different income groups in most of these provinces.Therefore,it is proper to consider differential carbon prices for different regions in order to mitigate the potential regional regressive distributional impact.