TITLE:
A Study on the Optimal Carbon Tax and Effects under the Background of Carbon Tariffs: A Theoretical Analysis Based on Oligopoly Competition Model
AUTHORS:
Yaxian Dai, Hongjin Xiang
KEYWORDS:
Carbon Tariffs, Carbon Tax, Welfare Effect, Oligopoly Competition Model
JOURNAL NAME:
Modern Economy,
Vol.14 No.7,
July
19,
2023
ABSTRACT: Against the backdrop of the EU’s implementation of a
carbon border regulation mechanism in 2026, it is crucial for developing
countries to address this issue. This paper is based on a two-stage oligopoly
competition model, considering that some of the products produced by developing
countries are used for export and some are used for domestic sales. Factors
such as carbon emissions reduction and production cost differences between
developed and developing countries are included to explore the optimal setting
of carbon taxes in developing countries and the impact of carbon tariffs on
welfare, trade, and environmental effects in developing countries. The research
results indicate that: 1) the optimal carbon tax setting in developing
countries is related to the production costs and carbon tariff coefficients of
developed countries. There is a negative correlation with production costs in
developed countries and a positive correlation with carbon tariff coefficients.
2) The social welfare of developing countries increases with the increase of
production costs in developed countries; with the increase in carbon tariffs
imposed by developed countries, the social welfare of developing countries
first decreases and then increases. 3) The profits of enterprises in developing
countries first decrease and then increase with the increase of production
costs in developed countries; with the increase in carbon tariffs imposed by
developed countries. 4) The environmental pollution of developing countries
will increase with the increase of production costs in developed countries, and
decrease with the increase of carbon tariffs. Based on this, this article
proposes relevant policy recommendations for developing countries.