Environmental taxation and regional inequality in China

Jingxu Wang; Jintai Lin; Kuishuang Feng; Peng Liu; Mingxi Du; Ruijing Ni; Lulu Chen; Hao Kong; Hongjian Weng; Mengyao Liu; Giovanni Baiocchi; Yu Zhao; Zhifu Mi; Jing Cao; Klaus Hubacek

doi:10.1016/j.scib.2019.09.017

Environmental taxation and regional inequality in China

Sci Bull (Beijing). 2019 Nov 30;64(22):1691-1699. doi: 10.1016/j.scib.2019.09.017. Epub 2019 Sep 19.

Authors

Jingxu Wang¹, Jintai Lin², Kuishuang Feng³, Peng Liu¹, Mingxi Du¹, Ruijing Ni¹, Lulu Chen¹, Hao Kong¹, Hongjian Weng¹, Mengyao Liu¹, Giovanni Baiocchi⁴, Yu Zhao⁵, Zhifu Mi⁶, Jing Cao⁷, Klaus Hubacek⁸

Affiliations

¹ Laboratory for Climate and Ocean-Atmosphere Studies, Department of Atmospheric and Oceanic Sciences, School of Physics, Peking University, Beijing 100871, China.
² Laboratory for Climate and Ocean-Atmosphere Studies, Department of Atmospheric and Oceanic Sciences, School of Physics, Peking University, Beijing 100871, China. Electronic address: linjt@pku.edu.cn.
³ Department of Geographical Sciences, University of Maryland, College Park, MD 20742, USA. Electronic address: kfeng@umd.edu.
⁴ Department of Geographical Sciences, University of Maryland, College Park, MD 20742, USA.
⁵ School of the Environment, Nanjing University, Nanjing 210046, China.
⁶ The Bartlett School of Construction and Project Management, University College London, London WC1E 7HB, UK.
⁷ School of Economics and Management, Hang Lung Center for Real Estate, Tsinghua University, Beijing 100084, China.
⁸ Center for Energy and Environmental Sciences (IVEM), Energy and Sustainability Research Institute Groningen (ESRIG), University of Groningen, Groningen 9747 AG, the Netherlands; International Institute for Applied Systems Analysis, Schlossplatz 1, A-2361 Laxenburg, Austria; Department of Environmental Studies, Masaryk University, Joštova 10, 602 00 Brno, Czech Republic. Electronic address: hubacek@umd.edu.

PMID: 36659783
DOI: 10.1016/j.scib.2019.09.017

Abstract

In order to combat environmental pollution, China enacted the Environmental Protection Tax Law in early 2018. Yet the impacts of the environmental tax on individual regions with different socioeconomic statuses, which are crucial for social justice and public acceptance, remain unclear. Based on a Multi-Regional Input-Output (MRIO) table and a nationally regulated tax payment calculation method, this study analyzes the distributional impacts of an environmental tax based upon province's consumption from both inter-provincial and rural-urban aspects. The national tax revenue based on the current levy mechanism is estimated to be only one seventh of the economic loss from premature mortality caused by ambient particulate matter (PM_2.5). The taxation may slightly alleviate urban-rural inequality but may not be helpful with reducing inter-provincial inequality. We further analyze two alternative levy mechanisms. If each province imposes taxes to products it consumes (rather than produces, as in the current mechanism), with the tax rate linearly dependent on its per capita consumption expenditure, this would moderately increase the national tax revenue and significantly reduce inter-provincial inequality. To better compensate for the economic costs of air pollution and reduce regional inequality, it would be beneficial to increase the tax rate nationwide and implement a levy mechanism based on provincially differentiated levels of consumption and economic status.

Keywords: Air pollution; China; Environmental taxation; Inequality; Input-output analysis; Levy mechanisms.