Decarbonizing China's Freight Sector: Spatial Impacts of Carbon Taxation on Trade Patterns and Production Allocation in a CGE Framework

Abstract

Reducing emissions in the freight sector is a key focus in China's pursuit of sustainability. Previous studies have not adequately addressed the complex interplay between freight activity, commodity movements, and geographical distances in evaluating mitigation policies. Here, we developed a new distance-based computable general equilibrium (CGE) model to address the freight costs between regions, enabling a detailed analysis of the spatial trade patterns, production relocation, and environmental impacts of different carbon tax scenarios on the freight sector. We found that a substantial carbon tax collection (700 CNY/ton CO₂ by 2025) could reduce China's total freight turnover by 1.60% and cut industry-wide CO₂ emission by approximately 200 million tons (accounting for 1.8% of total CO₂ emissions in China). The response to freight carbon tax varies with distance: longer bilateral trade distances experience a sharper decline in freight volume, while shorter intra-provincial and neighboring interprovincial trade becomes more prosperous. Production activity tends to relocate to regions closer to customers and suppliers under the carbon tax, and each additional 1,000 km trade distance is associated with 0.3–1.2% reduction in provincial production. By integrating a spatial dimension into a CGE framework, our study elucidates how freight cost redistributes policy costs and benefits across regions, offering a more nuanced foundation for the design of targeted, regionally balanced carbon tax policies in China's freight decarbonization strategy.