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An analysis on the short-term sectoral competitiveness impact of carbon tax in China

Xin Wang; Ji Feng Li; Ya Xiong Zhang
Idées pour le débat N°03/2010. Iddri, 2010. 20 p.
Un article écrit par Xin WANG (Iddri, EQUIPPE-Université Lille 1), Ji Feng LI (Ph.D, research fellow, Economic Forecasting Department-State Information Center of China) et Ya Xiong ZHANG (Ph.D, deputy director of Economic Forecasting Department, head of Policy Simulation Division-State Information Center of China).

Points clés :

Market-based instruments offer a level of cost-effectiveness that has recently drawn the attention of the Chinese government. Particularly, carbon tax has been frequently debated at ministerial level. However, there is little research focusing on the short-term impact on sectoral competitiveness in China.

We divided China’s economy into 36 sectors, based on its 2007 input-output table, in order to examine the ratio of carbon tax added costs to sector GDP. We then divided the sectoral trade impact into domestic competitiveness with regards to foreign imported products and international competitiveness external to the Chinese domestic market.

We examined which industries will potentially be affected, and to what extent, by the implementation of a carbon tax in China in order to determine the tax rate and to consider compensatory measures that may be required to address sectoral differences.

A high tax level (100 yuan/t CO2) may necessitate compensatory measures to a few highly affected industries; a low tax rate (10 yuan/t CO2) would generate few competitiveness problems for all industries and may therefore be considered as an appropriate starting point.

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