When differentiated carbon tax policy meets LBD of renewable energy and electrification of energy end-use: Policy implications of sectoral differentiation of carbon productivity and carbon emission

Abstract

The impact of environmental policy stringency on energy efficiency innovation has been studied well without considering renewable energy storage and electrification to meet demand for energy structural transition in China. Based on these past studies, this paper introduces the CGE model to analyze carbon tax stringency via carbon productivity by accounting for the electrification and learning-by-doing effect of renewable energy. Through comparing the performance of the uniform and differentiated carbon tax, it is found that the differentiated carbon tax always has a worse environmental performance in reducing carbon emissions due to less energy efficiency improvement than uniform one. While uniform carbon tax at stricter level gains more economic and environmental benefits on sectoral and overall aspects in long term because of greater improvement on sectoral carbon productivity in energy-intensive industries. Furthermore, these findings at a large level reveal the intricate interaction among carbon tax, sectoral carbon productivity, renewables-related subsidy, electrification, and the learning-by-doing of renewables for accelerating the energy structural transition and simultaneously achieving the coordination between economic growth and environmental protection.