Environmental and economy-wide impacts of green fiscal policies on digital economy development: A CGE-based analysis

Abstract

Coordinating digital economy development with carbon reduction strategies is crucial for promoting high-quality economic growth in China under the influence of carbon peaking and neutrality goals. Therefore, this study developed a computable general equilibrium model with a digital economy module for assessing the environmental and socio-economic effects of green fiscal policies on digital economic development within a dual-carbon strategy. First, results indicate that to protect gross domestic product (GDP) and the digital economy, combining carbon pricing (CP) and increased investment in digital economy sectors can be considered. This approach has the smallest GDP loss and can bring the most significant value-added and profit growth to the digital economy. Moreover, it could significantly increase the renewable energy share and electrification rate, thus enhancing synergistic emission reduction effects. Second, since the focus of digital economy development varies at different stages, we can consider either CP alone or a combination of CP and increased investment in the digital economy if digital-enabling infrastructure is prioritised. Alternatively, CP can be combined with subsidies for the digital economy if digital trade development is emphasised. Third, it is not feasible to separately reduce indirect tax rates in the digital economy sector to avoid increasing negative socio-economic impacts.