Balancing Growth and Emission Reduction: Evaluating Carbon Tax’s Impact on Sustainable Development in China

The carbon tax is a crucial economic instrument for China; it aims to encourage the reduction of carbon emissions and provide additional revenue for the government in order to promote the transformation of society towards low-carbon and sustainable development. The suboptimal carbon tax refers to the carbon tax rate that achieves the best balance between emission reduction targets and economic benefits. Using China’s 2020 Non-competitive Input–Output Table, which encompasses 42 sectors, alongside carbon emission data sourced from the China Carbon Emission Accounts and Datasets (CEADs) covering 47 sectors, this study established a Carbon Tax-adjusted Input–Output Table of China’s Non-competitive Carbon Emissions 2020 (26 sectors) and constructed a multi-objective suboptimal carbon tax model based on an input–output price change model. Based on these, the suboptimal carbon tax rates under four different sets of constraints were simulated, including 49.2 CNY/ton (low inflation), 98.3 CNY/ton (low-to-medium inflation), 147.1 CNY/ton (medium-to-high inflation), and 195.5 CNY/ton (high inflation). We found that the suboptimal carbon tax should take into account its impact on prices, carbon reduction, and GDP, and higher carbon tax rates lead to more significant macroeconomic impacts and increased efforts in reducing emissions. Policy recommendations have also been put forward, such as launching a comprehensive research framework, establishing a synergistic and complementary mechanism between carbon taxation and carbon trading, designing a dynamic carbon tax, etc.