Author(s)

Hongjin Xiang, Jiale Wang, Yanxiang Kuang^*

School of Economics, Nanjing Audit University, Nanjing, China.

A two-stage game model was established against the backdrop of border carbon adjustment imposed by foreign countries, with a focus on exploring the impact of border carbon adjustment imposed by foreign countries on the output and profits of domestic export enterprises. Besides, the decision on the optimal environmental tax in China under border carbon adjustments was further discussed. This article argues that the imposition of border carbon adjustment by foreign countries will reduce the balanced export volume and export profits of domestic export enterprises, while also increasing the profits of foreign enterprises; the decision on the optimal domestic environmental tax depends on the tax rate of border carbon adjustment imposed by foreign countries. The higher the border carbon adjustment rate imposed by foreign countries on our country, the higher the optimal domestic environmental tax rate in China. The lower the border carbon adjustment rate imposed by foreign countries on our country, the lower the optimal domestic environmental tax rate in China. Based on these conclusions, relevant policy recommendations were proposed.

Border Carbon Adjustment, Cournot Model, Optimal Environmental Tax, China

Xiang, H. , Wang, J. and Kuang, Y. (2023) Border Carbon Adjustment and China’s Optimal Environmental Tax: A Theoretical Analysis Based on Oligopoly Competition Model. Theoretical Economics Letters, 13, 1241-1252. doi: 10.4236/tel.2023.135068.