The Choice of Carbon Tax and Its Way in China

55 Pages Posted: 27 Apr 2018

See all articles by Kaijie Wu

Kaijie Wu

Renmin University of China, Law School

Date Written: April 23, 2018


Climate change is a serious problem confronted by China and the world. While China have strong motivations to handle this problem, current command-and-control regulations, fiscal subsidies, and sector-specific policies are not effective enough. In comparison, carbon pricing is a promising option to address the climate change issue. By putting a price on carbon, carbon-reducing behaviors are encouraged, carbon-reducing costs are minimized, and different sectors have equal incentives to reduce carbon emissions. If a carbon pricing regime were to be established in China, a carbon tax would be a better choice than a carbon trading system. A carbon tax could send a strong and clear signal, ensure policy stability and predictability, and could be more politically acceptable, administratively feasible, and economically efficient than a carbon trading system. Consistent with the idea of a carbon tax, some existing taxes in China have been greened to reduce carbon emissions, but their effect is limited. Recent changes in carbon-related taxes like the resource tax, the fuel tax, and the three vehicle-related tax have contributed to carbon reductions, but these changes are still more of a strengthened response to their own issues rather than a new response to the climate change issue. To avoid the restrictions of existing carbon-related taxes, which follow different principles from a carbon tax, a carbon tax should be independently enacted in China.

Keywords: Climate change; Carbon tax; Carbon trading; China

Suggested Citation

Wu, Kaijie, The Choice of Carbon Tax and Its Way in China (April 23, 2018). Available at SSRN: or

Kaijie Wu (Contact Author)

Renmin University of China, Law School ( email )

59 Zhongguancun Avenue
Haidian District

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