Game Analysis On Carbon Tax

As the global climate change has become the world’s most popular focus. Thereduction of carbon dioxide emission has also been a growing national concern. Chinaas a country which views fossil fuel as the main energy, the emissions of carbondioxide increase day by day, which has become a severe challenge in China ’s energydevelopment.The Copenhagen climate summit, more make our country to consider inthe twelfth five-year levy carbon tax, carbon tax has already become an inevitabletrend in terms of energy saving and emission reduction, optimization and upgradingof industrial structure,establishment of its image as a country. In view of this, thisarticle analyzes carbon tax from the interactive game perspective of government andthe enterprise. This paper investigates the incentives to adopt advanced abatementtechnology created by emission taxes as well as corresponding time consistencyproblem. If the damage function is linear, first best tax rate is socially efficient interms of technology adoption. If the damage function is convex, inefficient incentiveswill be induced and time consistency problem arises to some extent. Tax ratchetingpolicy can be introduced to solve the problem of potential time inconsistency but notnecessarily the problem of wrong incentives. Based on the Requate&Unold (2003)，this article take the time consistency problem of the government and enterprises intofull consideration, which can discuss the mechanism of dynamic game betweengovernment and enterprises more comprehensive and complete. This may be thepossible innovation of the article.