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ABSTRACT
This paper has established the computable general equilibrium (CGE) model to analyze the effect of carbon tax policy on energy consumption and CO2 emission in China. The analysis shows that with the increase of CO2 mitigation, the level of carbon tax will gradually increase; meanwhile the ad valorem tax rates of coal, petroleum, and natural gas go up as well, and the coal tax rate is the highest among them. In addition, with the increase of CO2 emission reductions, the demand for coal, petroleum, natural gas, and thermal power will totally decrease. The demand for coal will drop significantly. The main factor responsible for China’s CO2 mitigation is coal. Moreover, the sectors of coal, heavy industries, thermal power, light industries, natural gas, and transportation contribute more to CO2 emission reductions, while the other sectors contribute less.