The Conceit of Carbon Tax Designs Based on Tax System Innovation in China

Carbon tax is not only an important part of the environmental taxation system, but also an important tool of environmental economic policy. The theoretical basis of a carbon tax is to internalize externalities in order to avoid the Tragedy of the Commons in atmosphere. Carbon tax would greatly decrease CO₂ emissions. It would restrain economic growth in the short term, but is conducive to the healthy development of economy in the medium and long term, Meanwhile, it would reduce energy consumption and energy intensity, and would promote changes in energy consumption structure, but it increases the gap of income distribution between capital and labor and exacerbates social injustice. China has a huge pressure of CO₂ emissions reduction after 2012, therefore, I recommend that the government begins to levy a carbon tax in 2013 and implement a low tax rate of 20CNY/tc which increases gradually in future.