Impacts of sulfur taxation on the Chinese macroeconomy and industrial sectors

This paper builds a CGE model for evaluating the impacts of sulfur taxation on Chinese macro-economy and industrial sectors. Some major findings are: 1) the imposition of sulfur taxation promotes agents to substitute no-sulfur and low-sulfur contained energy for high-sulfur contained energy, and causes industrial sectors' input structures of labor, capital and energy to vary differently; 2) with the ratio of sulfur taxation increasing, low-sulfur contained coal changes from the alternative to be alternated, and its output takes on an inverted U-shaped; 3) except that energy sectors' output prices with sulfur taxation imposed on production process are higher than that imposed on consumption process, the difference of impacts on the real economy between these two imposition process is tiny; 4) the three ways of tax revenue use, retained in government, returned to firms, and returned to residents, all produce the negatively small impact on the real GDP, moreover, among the three ways, the negative impacts of the second way on the real GDP, import, and export, are the smallest, and on the disposable income and welfare of the residents are middle. Finally, we put forward some policy suggestions according to the above-mentioned results.