Carbon Tax and the Industrial Sector in Developed and Developing Countries A Dynamic General Equilibrium Model

Aim and Introduction Carbon tax is one of the most important policy tools in the field of energy, which is applied to the consumption, production or distribution of fossil energy, including oil products, coal, natural gas, etc. The purpose of carbon tax is to reduce economic and environmental effects caused by pollution by including environmental costs in the price of goods and services. This policy tool can bring positive economic and environmental consequences through changes in consumer and producer behavior. The purpose of this study is to investigate the effects of carbon tax on energy-intensive and non-energy-intensive industries in different regions of the world. Methodology Since a CGE model can describe the interactions between different factors in macroeconomic systems and examine the effects of a policy at the global level, therefore, a dynamic multi-regional CGE model has been used to better understand the policy effects. Results and Discussion The results show that the carbon tax in all scenarios leads to an increase in the price of goods with high energy intensity in all regions, and the price of goods with low energy intensity decreases, except in the group of developed and high-income countries. Production in the energy-intensive and non-energy-intensive sectors is facing an average decrease. Imports in the energy-intensive sector, except for the group of countries with higher-than-average income, will decrease for other groups, and in the non-energy-intensive sector as well. Conclusion To investigate the effect of carbon tax on the industries of different countries, first the countries of the world were grouped into 5 regions based on the criteria of the World Bank and then 5 policy scenarios based on the report of the International Energy Agency were implemented in each region. For modeling, a dynamic calculable general equilibrium model was used in order to achieve more accurate results, and then important industrial consequences were obtained by solving the model. From the results of this research and the studies that have been carried out so far, it can be seen that what is decisive in the consequences of the implementation of the carbon tax is the region and the country implementing the policy. Based on this, the policy makers, considering the national and regional conditions and being aware of the possible effects of the policy, can include assumptions in the design and implementation of the policy in order to achieve efficient and appropriate conditions in the implementation of the carbon tax by reducing the negative effects. Based on the results of the research, it was observed that due to the differences in the regions, the macroeconomic effects in the industry will be different for different regions of the world. Therefore, one of the important points in the effort to bring the emission of greenhouse gases to zero is to pay attention to the differences in industries in different countries and the coordinated actions of the governments with each other for technical and financial support in order to accelerate the transformation of clean energy and reach the commitment goal. Since energy consumption is mainly related to production activities, especially production from energy-intensive industries, reducing greenhouse gas emissions from industry takes more time than some economic sectors. For this purpose, governments should present regular and specific programs to attract investments in the long term so that they can guide industries in the direction of deploying the most efficient technologies. The governments that implement carbon tax policies can also use the collected tax revenues to strengthen energy innovation. Therefore, industries that use unclean energy sources as production inputs, by upgrading production technologies, in addition to reducing production costs, can specialize in producing clean products