The Sino-US Carbon Tariffs And Trade Balance

The analysis on carbon pollution is of high importance to international trade and domestic environment. This paper uses a static computable general equilibrium model to conduct verified carbon tariff scenario simulations of the major industries in Sino-US bilateral trade. This model uses GTAP database with I-O table of year2007.This paper focuses on US and China, high-lighting nine sectors listed by China’s12th Five-Year Plan on industrial energy efficiency:iron and steel, non-ferrous metals, petrochemicals, chemicals, building materials, machinery, light industry, textile and electronic information. Three scenarios are set:(1) US levies carbon tax on all domestic sectors and border adjustment tax on China’s nine sectors;(2) US levies carbon tariff on China’s nine sectors and vice versa;(3) US pays carbon import subsidy to China’s processing exports from those nine sectors. Carbon price is graded to lOusd/ton,30usd/ton and50usd/ton. Both direct and complete consumption coefficient are adopted to estimate each sector’s carbon emission.This paper finds:(1) Either carbon tax or tariff causes GDP loss. Transfer payment of tax revenue increases social welfare.(2) Factors’and intermediates’ prices decrease by the post-tariff demand effect. Different taxes lead to various price sensitivities.(3) The change of trade balance shows the agglomerative effect, those most volatile sectors are either with large export volume or with high carbon intensity. Some export substitution effects are reflected in China’s export industry.(4) Externality of bilateral carbon policy booms the export of sectors without carbon tariffs, which balances the general trade change. And the spillover effect of Sino-US trade changes the global trade pattern.