Optimization Choices of Carbon Tax Policies for Energy Enterprises Based on Effects of Carbon Emissions Reduction

Energy enterprises are the main energy consumer and carbon emitter in an economy. Reducing enterprises’ carbon emissions during processes of production is an important standard to evaluate the effectiveness of the government’s carbon policy. By establishing a model of carbon emissions reduction effect for a representative energy enterprise, this study analyzed changes in input factor price, how to affect decision of production, and resulting effects of carbon emissions reduction under different government’s carbon policies. Results indicate that 1) effects of energy enterprises’ carbon emissions reduction are affected by varying factors, such as substitution effect, income effect, and interaction effect of carbon programs, and the elasticity of input factors. 2) According to the welfare economics theory, carbon emissions are an external problem, which can be internalized by levying Pigovian tax (or providing subsidy) on carbon emitters, thus levying carbon regarded as the best policy choice to control enterprises’ carbon emissions. In order to test the effectiveness of the theory, a simulation example for the thermal power enterprise and iron steel enterprise was given to illustrate effects of carbon emissions reduction under different carbon programs and 10 rates. The best carbon program is levying carbon on high-carbon emission inputs and providing subsidies on low-carbon emission inputs as well. Providing subsidy is the second best choice. Levying a single carbon is the third best choice. China’s current environment system seems to be incomplete in many aspects. The price of high-carbon inputs or low carbon inputs was taxed by other items. Therefore, levying a single carbon on them will result in a higher price than before, and will not result in expected effects of carbon emissions reduction. The effect of carbon emissions reduction is also smaller than that of providing a single subsidy on low-carbon inputs. Therefore, the government should give a priority to former two policy programs while not levying a single carbon so as to achieve a better effect of carbon emissions reduction. Such an analysis enriches studies on carbon policy and also provides a way for governments to formulate appropriate carbon policies in low-carbon economy.